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Layoffs, Lemons, Race, and Gender

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  • Luojia Hu
  • Christopher Taber

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11481.

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Date of creation: Jul 2005
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Handle: RePEc:nbr:nberwo:11481

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  1. Joseph G. Altonji & Rebecca M. Blank, . "Race and Gender in the Labor Market," IPR working papers 98-18, Institute for Policy Resarch at Northwestern University.
  2. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
  3. 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.
  4. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(4), pages 351-80, October.
  5. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  6. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 87(3), pages 355-74, August.
  7. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226041162.
  8. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
  9. 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.
  10. 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.
  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. 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, vol. 30(2), pages 317-327, March.
  2. Michèle A. Weynandt, 2014. "Selective Firing and Lemons," NRN working papers 2014-05, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  3. Ian Jewitt & Clare Leaver & Heski Bar-Isaac, 2007. "Information and Human Capital Management," Economics Series Working Papers 367, University of Oxford, Department of Economics.

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