This paper presents a novel explanation of why workers may seek to defend obsolete jobs rather than accepting compensation for job loss. Existing scholarship explains the non-emergence of compensatory bargains with reference to commitment problems. I show that information problems can prevent the emergence of compensatory bargains even if the government can fully commit. Incomplete information prevents the government from screening between the intended beneficiaries of its compensation policy and opportunistic claimants. To limit opportunism, the maximum compensation that a government can offer is less than the expected costs of job loss. This, however, preserves the intended beneficiaries’ incentive to defend their jobs. Empirically, I study the failure of a compensatory solution to technological job losses in postwar Britain. New evidence from government and union archives shows that information problems deterred the government from offering full compensation to displaced workers, leading to the persistence of inefficient conflict in British industry.
