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Not in My Community: Social Pressure and the Geography of Dismissals

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  • Andrea Bassanini
  • Giorgio Brunello
  • Eve Caroli

Abstract

We investigate the impact of local social pressure on firms' firing decisions. Using linked employer-employee data, we show that secondary establishments located further away from headquarters have higher dismissal rates than those located closer. The effect of distance on dismissals is stronger, the greater the visibility of the firm in the local community of its headquarters and the larger the degree of selfishness of that community. We show that these findings can be explained by the social pressure exerted by the communities where firms' headquarters are located, which induces CEOs to refrain from dismissing at short distance from their headquarters.

Suggested Citation

  • Andrea Bassanini & Giorgio Brunello & Eve Caroli, 2017. "Not in My Community: Social Pressure and the Geography of Dismissals," Journal of Labor Economics, University of Chicago Press, vol. 35(2), pages 429-483.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/689285
    DOI: 10.1086/689285
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    2. Bassanini, Andrea & Caroli, Eve & Fontaine, François & Rebérioux, Antoine, 2021. "Escaping social pressure: Fixed-term contracts in multi-establishment firms," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 697-715.
    3. Kuhn, Andreas & Schweri, Jürg & Wolter, Stefan C., 2022. "Local norms describing the role of the state and the private provision of training," European Journal of Political Economy, Elsevier, vol. 75(C).
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    6. Andrea Bassanini & Eve Caroli & Kevin Geay & Antoine Rebérioux, 2023. "Heavy is the Crown: CEOs' Social Interactions and Layoff Decisions," Working Papers hal-04118212, HAL.
    7. Tito Boeri & Juan F. Jimeno, 2015. "The unbearable divergence of unemployment in europe," Working Papers 1534, Banco de España.
    8. Andrews Dan & Ferrari Irene & Saia Alessandro, 2019. "The Costs of Firm Exit and Labour Market Policies: New Evidence from Europe," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-24, January.
    9. Bäurle, Gregor & Lein, Sarah M. & Steiner, Elizabeth, 2021. "Employment adjustment and financial tightness – Evidence from firm-level data," Journal of International Money and Finance, Elsevier, vol. 115(C).
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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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