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Layoffs, Lemons, Race and Gender

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  • Hu, Luojia

    ()
    (Federal Reserve Bank of Chicago)

  • Taber, Christopher

    ()
    (University of Wisconsin-Madison)

Abstract

This paper expands on Gibbons and Katz (1991) by looking at how the difference in wage losses across plant closing and layoff varies with race and gender. We find that the differences between white males and the other groups are striking and complex. The lemons effect of layoff holds for white males as in Gibbons and Katz model, but not for the other three demographic groups (white females, black females, and black males). These three all experience a greater decline in earnings at plant closings than at layoffs. This results from two reinforcing effects. First, plant closings have substantially more negative effects on minorities than on whites. Second, layoffs seem to have more negative consequences for white men than the other groups. We also find that the relative wage losses of blacks following layoffs increased after the Civil Rights Act of 1991 which we take as suggestive of an informational effect of layoff as in Gibbons and Katz. The results are suggestive that the large losses that African Americans experience at plant closing could result from heterogeneity in taste discrimination across firms.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1702.

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Length: 28 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1702

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Keywords: discrimination; asymmetric information; displaced workers; racial and gender wage gap; heterogenous human capital;

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  1. Gibbons, Robert & Katz, Lawrence F., 1991. "Layoffs and Lemons," Scholarly Articles 3442782, Harvard University Department of Economics.
  2. Joseph G. Altonji & Charles R. Pierret, . "Employer Learning and Statistical Discrimination," IPR working papers, Institute for Policy Resarch at Northwestern University 97-18, Institute for Policy Resarch at Northwestern University.
  3. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226041162, 01-2013.
  4. Akerlof, George A, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 599-617, November.
  5. Joseph G. Altonji & Rebecca M. Blank, . "Race and Gender in the Labor Market," IPR working papers, Institute for Policy Resarch at Northwestern University 98-18, Institute for Policy Resarch at Northwestern University.
  6. Richard Startz & Lundberg, . "Private Discrimination and Social Intervention in Competitive Labor Markets," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 19-81, Wharton School Rodney L. White Center for Financial Research.
  7. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, American Economic Association, vol. 83(5), pages 1220-40, December.
  8. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 87(3), pages 355-74, August.
  9. Harry Krashinsky, 2002. "Evidence on adverse selection and establishment size in the labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 84-96, October.
  10. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, American Economic Association, vol. 62(4), pages 659-61, September.
  11. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
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Cited by:
  1. Nicholas Economides & Katja Seim & V. Brian Viard, 2007. "Quantifying the Benefits of Entry into Local Phone Service," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 07-28, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Michèle A. Weynandt, 2014. "Selective Firing and Lemons," NRN working papers, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria 2014-05, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  3. Deb, Partha & Gallo, William T. & Ayyagari, Padmaja & Fletcher, Jason M. & Sindelar, Jody L., 2011. "The effect of job loss on overweight and drinking," Journal of Health Economics, Elsevier, Elsevier, vol. 30(2), pages 317-327, March.

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