Discussion paper

DP16370 Returns to Labor Mobility: Layoff Costs and Quit Turbulence

Although they are studied too rarely, returns to labor mobility transmit important forces that decisively shape outcomes in macro-labor models. By focusing on returns to labor mobility, this paper sheds new light on calibrations of influential macro-labor studies and resolves an issue about the turbulence-theoretic explanation of trans-Atlantic unemployment experiences. It does so by invoking a cross-phenomenon restriction -- in our case, how returns to labor mobility determine effects on unemployment of changes in layoff costs, on the one hand, and changes in quit turbulence, on the other hand. We also spotlight two distinct perspectives and associated sources of data: one from labor economics and another from the economics of industrial organization. Ultimately, we are reminded of the rule that new theories "must not throw out all the successes of former theories. ... to preserve the successes of the past is not only a constraint, but also a guide."


Baley, I, L Ljungqvist and T Sargent (2021), ‘DP16370 Returns to Labor Mobility: Layoff Costs and Quit Turbulence‘, CEPR Discussion Paper No. 16370. CEPR Press, Paris & London. https://cepr.org/publications/dp16370