Truth or Macroeconomic Consequences: The Demise of References in the United States

Document Type

Working Paper

Date of This Version

1-1-1997

Keywords

references, unemployment

Abstract

Since the early 1970s, there has been a dramatic change in the way firms handle reference requests. Before 1970, firms would willingly provide detailed information about a former employee's job performance. More recently , firms have become reluctant to provide information due to a perceived increase in either the frequency of employee defamation suits or the magnitude of the settlements. This paper develops a model in which firms willingly provide references when associated costs are low, but cease providing references when costs rise dramatically. This model predicts several consequences of such a decline in the use of references; a key prediction is an increase in the natural rate of unemployment.

Working Paper Number

9604

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