Advanced Search
MyIDEAS: Login

Plant Closings, Labor Demand and the Value of the Firm

Contents:

Author Info

  • Daniel S. Hamermesh

Abstract

This study postulates an internal labor market in which workers accumulate firm-specific human capital that raises the value of the firm and insulates it to some extent from the vagaries of product demand that might result in its closing. Negative product-market shocks reduce wage growth and increase the probability of the firm closing. The model also predicts a U-shaped relation between the probability of the plant closing and the length of a worker's tenure, a proxy for firm-specific human investment. PSID data for 1977 through 1981 are used to produce weighted-probit estimates of the parameters of an equation describing the probability of displacement. The results support most of the predictions of the model, but similarly specified equations describing the probability of permanent layoff indicate that a theory of plant closings must differ from that of layoffs. The parameter estimates are used to infer an analogue to the firm's elasticity of demand for labor and to deduce the wage reduction necessary to avoid an increase in the probability of a plant closing when a negative demand shock occurs.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w1839.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1839.

as in new window
Length:
Date of creation: Feb 1989
Date of revision:
Handle: RePEc:nbr:nberwo:1839

Note: LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

References

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.:
as in new window
  1. Daniel J. B. Mitchell, 1982. "Recent Union Contract Concessions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 165-204.
  2. Raisian, John, 1983. "Contracts, Job Experience, and Cyclical Labor Market Adjustments," Journal of Labor Economics, University of Chicago Press, vol. 1(2), pages 152-70, April.
  3. Jacob Mincer & Boyan Jovanovic, 1981. "Labor Mobility and Wages," NBER Chapters, in: Studies in Labor Markets, pages 21-64 National Bureau of Economic Research, Inc.
  4. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
  5. Feldstein, Martin & Poterba, James, 1984. "Unemployment insurance and reservation wages," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 141-167.
  6. Sherwin Rosen, 1985. "Implicit Contracts: A Survey," NBER Working Papers 1635, National Bureau of Economic Research, Inc.
  7. Colin Lawrence & Robert Z. Lawrence, 1985. "Manufacturing Wage Dispersion: An End Game Interpretation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 47-116.
  8. Blau, Francine D & Kahn, Lawrence M, 1981. "Causes and Consequences of Layoffs," Economic Inquiry, Western Economic Association International, vol. 19(2), pages 270-96, April.
  9. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 51-75, February.
  10. Katharine G. Abraham & James L. Medoff, 1984. "Length of service and layoffs in union and nonunion work groups," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(1), pages 87-97, October.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1839

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.