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Evidence on adverse selection and establishment size in the labor market

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  • Harry Krashinsky

Abstract

A commonly suggested explanation for the finding that laid-off workers have greater mean post-displacement earnings losses than workers who lose their jobs through plant closings is that the former are of lower quality than the latter. But there is also an alternative explanation for this result: laid-off workers suffer larger earnings losses because, as a group, they have more to lose in the first place, having been displaced from larger, higher-wage establishments. An analysis of data from the National Longitudinal Survey of Youth confirms this hypothesis. Accounting for establishment size removes virtually all of the difference in wage losses for the two groups of displaced workers. (Author's abstract.)

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Bibliographic Info

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

Volume (Year): 56 (2002)
Issue (Month): 1 (October)
Pages: 84-96

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Handle: RePEc:ilr:articl:v:56:y:2002:i:1:p:84-96

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Cited by:
  1. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2006. "The Short- and Long-Term Career Effects of Graduating in a Recession: Hysteresis and Heterogeneity in the Market for College Graduates," NBER Working Papers 12159, National Bureau of Economic Research, Inc.
  2. Luojia Hu & Christopher Taber, 2005. "Layoffs, Lemons, Race, and Gender," NBER Working Papers 11481, National Bureau of Economic Research, Inc.
  3. Song, Younghwan, 2007. "Recall bias in the displaced workers survey: Are layoffs really lemons?," Labour Economics, Elsevier, vol. 14(3), pages 335-345, June.
  4. Carlos Henrique L.Corseuil & Rodrigo F.Dias, Miguel N. Foguel & Daniel D.Santos, 2009. "O Estigma da Perda de um Emprego Formal no Brasil," Discussion Papers 1446, Instituto de Pesquisa Econômica Aplicada - IPEA.
  5. Audra Bowlus & Lars Vilhuber, 2001. "Displaced Workers, Early Leavers, and Re-employment Wages," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20015, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  6. Stefan Bender & Till von Wachter, 2006. "In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers," American Economic Review, American Economic Association, vol. 96(5), pages 1679-1705, December.
  7. Luojia Hu & Christopher Taber, 2008. "Displacement, asymmetric information and heterogeneous human capital," Working Paper Series WP-08-02, Federal Reserve Bank of Chicago.
  8. Nakamura, Emi, 2008. "Layoffs and lemons over the business cycle," Economics Letters, Elsevier, vol. 99(1), pages 55-58, April.
  9. Daniel Sullivan & Till von Wachter, 2007. "Mortality, Mass-Layoffs, and Career Outcomes: An Analysis using Administrative Data," NBER Working Papers 13626, National Bureau of Economic Research, Inc.
  10. Kenneth A. Couch & Dana W. Placzek, 2010. "Earnings Losses of Displaced Workers Revisited," American Economic Review, American Economic Association, vol. 100(1), pages 572-89, March.
  11. Stephen M. Kosovich, 2009. "How do firms interpret a job loss? Evidence from the National Longitudinal Survey of Youth," Economics Bulletin, AccessEcon, vol. 29(2), pages 1070-1086.
  12. Luojia Hu & Christopher Taber, 2007. "Displacement, Asymmetric Information, and Heterogeneous Human Capital," Upjohn Working Papers and Journal Articles 07-136, W.E. Upjohn Institute for Employment Research.
  13. Oliver Ruf, 2008. "Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers," IEW - Working Papers 366, Institute for Empirical Research in Economics - University of Zurich.
  14. Néria Rodréguez-Planas, 2011. "Displacement, Signaling, and Recall Expectations," Working Papers 550, Barcelona Graduate School of Economics.
  15. Waldman, Michael, 2013. "Classic promotion tournaments versus market-based tournaments," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 198-210.

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