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When are layoffs acceptable? Evidence from a quasi-experiment

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Author Info
Gary Charness
David I. Levine

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Abstract

If, as has been widely suggested, internal labor markets are declining and a new employment contract with reduced employer-employee commitment is emerging, the criteria by which employees judge layoffs as fair or unfair may be changing. This paper presents findings relevant to that question, based on quasi-experimental surveys in Canada and the United States. Respondents rated layoffs stemming from reduced product demand as more fair than those resulting from employee suggestions. Behind this judgment, apparently, was the normative premise that companies should not punish employees for their efforts; rent-sharing norms appear to have played little or no role, as respondents deemed new technology an acceptable reason for layoffs. Consistent with theories of distributive and procedural equity, layoffs were perceived as more fair if the CEO voluntarily "shared the pain." Respondents in Silicon Valley were not more accepting of layoffs than were those in Canada, on average. (Abstract courtesy JSTOR.)

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Publisher Info
Article provided by ILR Review, ILR School, Cornell University in its journal ILR Review.

Volume (Year): 53 (2000)
Issue (Month): 3 (April)
Pages: 381-400
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Handle: RePEc:ilr:articl:v:53:y:2000:i:3:p:381-400

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November. [Downloadable!] (restricted)
  2. Libby Bishop & David I. Levine, 1999. "Computer-mediated communication as employee voice: A case study," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 52(2), pages 213-233, January.
  3. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May. [Downloadable!] (restricted)
  4. MacKenzie, Scott B. & Podsakoff, Philip M. & Fetter, Richard, 1991. "Organizational citizenship behavior and objective productivity as determinants of managerial evaluations of salespersons' performance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 50(1), pages 123-150, October. [Downloadable!] (restricted)
  5. Dial, Jay & Murphy, Kevin J., 1995. "Incentives, downsizing, and value creation at General Dynamics," Journal of Financial Economics, Elsevier, vol. 37(3), pages 261-314, March. [Downloadable!] (restricted)
  6. Chaness, G. & Levine, D.I., 1999. "Changes in the Employment Contract? Evidence from a Quasi-Experiment," Papers 70, California Berkeley - Institute of Industrial Relations.
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  7. Gorman, Raymond F & Kehr, James B, 1992. "Fairness as a Constraint on Profit Seeking: Comment," American Economic Review, American Economic Association, vol. 82(1), pages 355-58, March. [Downloadable!] (restricted)
  8. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September. [Downloadable!] (restricted)
  9. Levine, David I, 1993. "Fairness, Markets, and Ability to Pay: Evidence from Compensation Executives," American Economic Review, American Economic Association, vol. 83(5), pages 1241-59, December. [Downloadable!] (restricted)
  10. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jordi Brandts & Gary Charness, 1999. "Retribution in a Cheap-talk Experiment," Economics Working Papers 437, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  2. Jordi Brandts & Arno Riedl & Frans van Winden, 2004. "Competition and Well-Being," UFAE and IAE Working Papers 608.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  3. Jordi Brandts & Gary Charnes, . "Retribution In A Cheap-Talk Experiment," UFAE and IAE Working Papers 454.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  4. Pfeifer, Christian, 2005. "Fairness and the labour market; A theoretical and empirical analysis of layoffs in Germany," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-328, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
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