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Labor Turnover before Plant Closure:'Leaving the sinking ship' vs. 'Captain throwing ballast overboard'

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  • Guido Schwerdt

Abstract

Involuntary job loss in administrative data is commonly identified by focusing on mass-layoffs or plant closures. However, such events usually do not happen without prior knowledge, which potentially leads to selection in the labor turnover of distressed firms. We find that workers separating from closing plants up to 2 quarters before closure are associated with significantly lower displacement costs and on average significantly higher pre-closure earnings levels as opposed to ultimately displaced workers. Furthermore, our results indicate that displaced workers with high pre-closure earnings experience significantly lower reductions in future employment probabilities. These findings suggest that compositional differences cause estimated displacement costs to differ between early leavers and ultimately displaced workers. Focusing exclusively on the latter group would lead to an overestimation of displacement costs.

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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2007/22.

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Date of creation: 2007
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Handle: RePEc:eui:euiwps:eco2007/22

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Keywords: plant closure; labor turnover; exact-matching; employer-employee data;

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  1. Schwerdt, Guido & Ichino, Andrea & Ruf, Oliver & Winter-Ebmer, Rudolf & Zweimüller, Josef, 2010. "Does the color of the collar matter? Employment and earnings after plant closure," Economics Letters, Elsevier, vol. 108(2), pages 137-140, August.
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  7. Audra Bowlus & Lars Vilhuber, 2002. "Displaced workers, early leavers, and re-employment wages," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C1-1, International Conferences on Panel Data.
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  28. repec:ese:iserwp:2004-20 is not listed on IDEAS
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