David Seim, Stockholm University

"Mandatory Advance Notice of Layoff: Evidence and Efficiency Considerations"


We investigate a prevalent, but understudied, employment protection policy: mandatory advance notice (MN), requiring employers to notify employees of forthcoming layoffs. MN increases future production, as notified workers search on the job, but reduces current production as they supply less effort. Our theoretical model captures this trade-off and predicts that MN improves production efficiency by increasing information sharing, whereas large production losses can be avoided by worker-firm agreements on side-payments – severance pay – in lieu of MN.
We provide evidence of such severance increases in response to an extension of MN using novel Swedish administrative data. We then estimate the production gain of MN: extending the MN period leads to shorter non-employment duration and higher reemployment wages, plausibly driven by on-the-job search. Using variation in notice duration across firms, we estimate the
productivity loss of notice. The estimates of benefits and costs suggest that MN has a positive net impact on production, offering an empirically-grounded efficiency argument for mandating notice.

David Seim is a Professor of Economics at the Department of Economics, Stockholm University. He was previously Assistant Professor of Economics at University of Toronto, a Visiting Professor at Brown University and at UC Berkeley. He holds a Ph.D. in Economics from the Institute for International Economic Studies, Stockholm University.

Seim's research spans the fields of public finance, labor economics, and political economy. In particular, he has studied the effectiveness of various taxes as well as the causes and consequences of inequality. His work has been published in the American Economic Review, the Quarterly Journal of Economics, and the Review of Economic Studies, among other journals.

Professor Seim is a co-Editor of the Journal of Public Economics. He is a Research Fellow of the Centre for Economic Policy Research (CEPR) in London, the Center for Economic Studies/ifo Institute (CESifo), the IZA Institute of Labor Economics and the EU Tax Observatory.

Contact person: Claus Thustrup Kreiner