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

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Author Info
Guido Schwerdt

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

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Find related papers by JEL classification:
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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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.:
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  2. Andrea Ichino & Guido Schwerdt & Rudolf Winter-Ebmer & Josef Zweimüller, 2007. "Too Old to Work, too Young to Retire?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-80, October. [Downloadable!] (restricted)
    Other versions:
  4. Jane Friesen, 1997. "Mandatory notice and the jobless durations of displaced workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 50(4), pages 652-666, July.
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  8. 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. [Downloadable!]
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  9. Jones, Stephen R G & Kuhn, Peter, 1995. "Mandatory Notice and Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 599-622, October. [Downloadable!] (restricted)
  10. Paul A. Lengermann, 2002. "Is it Who You Are, Where You Work, or With Whom You Work? Reassessing the Relationship Between Skill Segregation and Wage Inequality," Technical Papers 2002-10, Longitudinal Employer-Household Dynamics, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  11. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 50(1), pages 5-16, October.
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    Other versions:
  13. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
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  14. Anabela Carneiro & Pedro Portugal, 2003. "Wages and the Risk of Displacement," CETE Discussion Papers 0308, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
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  15. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October. [Downloadable!] (restricted)
    Other versions:
  16. Margolis, D.N., 2000. "Worker Displacement in France," Papiers d'Economie Mathématique et Applications 2000.03, Université Panthéon-Sorbonne (Paris 1).
    Other versions:
  17. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier. [Downloadable!] (restricted)
  18. Pfann, Gerard A. & Hamermesh, Daniel, 2001. "Two-Sided Learning, Labor Turnover and Worker Displacement," IZA Discussion Papers 308, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  19. Felli, Leonardo & Harris, Christopher, 1996. "Learning, Wage Dynamics, and Firm-Specific Human Capital," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 838-68, August. [Downloadable!] (restricted)
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    Other versions:
  21. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
  22. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning And Statistical Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 313-350, February. [Downloadable!] (restricted)
    Other versions:
Full references

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. Del Bono, Emilia & Weber, Andrea & Winter-Ebmer, Rudolf, 2008. "Clash of Career and Family. Fertility Decisions after Job Displacement," Economics Series 222, Institute for Advanced Studies. [Downloadable!]
    Other versions:
  2. Andrea Ichino & Guido Schwerdt & Rudolf Winter-Ebmer & Josef Zweimüller, 2007. "Too Old to Work, Too Young to Retire?," IZA Discussion Papers 3110, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Guido Schwerdt & Andrea Ichino & Oliver Ruf & Rudolf Winter-Ebmer & Josef Zweimüller, 2008. "Does the color of the collar matter? Firm specific human capital and post-displacement outcomes," Economics working papers 2008-09, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
    Other versions:
  4. repec:ese:iserwp: is not listed on IDEAS
  5. Oliver Ruf, 2008. "Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers," IEW - Working Papers iewwp366, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  6. Morten Henningsen and Torbjørn Hægeland, 2008. "Downsizing as a sorting device. Are low-productive workers more likely to leave downsizing firms?," Discussion Papers 543, Research Department of Statistics Norway. [Downloadable!]
  7. Zwick, Thomas, 2008. "Earnings Losses After Non-employment Increase With Age," ZEW Discussion Papers 08-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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