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Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers

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Author Info
Oliver Ruf
Abstract

This paper analyzes labor market success of workers who are displaced in boom versus recession periods. Moreover, the empirical analysis contrasts workers from small firms and large firms. The idea is that displacement carries no information about workers' productivity in large firms but is a signal of low productivity in small firms. This signal is stronger when the plant closure occurs in a boom period than in a recession period. Results indicate that the (i) state of the business cycle is important for influence the effect of displacement on labor market success and (ii) the effect differs by the size of the firm. In large firms, displaced workers suffer from larger earning losses when displacement occurs in recession compared to boom, the opposite result is found for workers displaced from small firms.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp366.

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Date of creation: Apr 2008
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Handle: RePEc:zur:iewwpx:366

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Related research
Keywords: Displaced workers; wage losses; business cycle; size of the firm;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

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  6. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March. [Downloadable!] (restricted)
  7. Harry Krashinsky, 2002. "Evidence on adverse selection and establishment size in the labor market," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 56(1), pages 84-96, October.
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  12. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 51-75, February. [Downloadable!] (restricted)
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  13. Daniel S. Hamermesh, 1987. "What Do We Know About Worker Displacement in the U.S.?," NBER Working Papers 2402, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Margolis, D.N., 2000. "Worker Displacement in France," Papiers d'Economie Mathématique et Applications 2000.03, Université Panthéon-Sorbonne (Paris 1).
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  15. Barlevy, Gadi, 2001. "Why Are the Wages of Job Changers So Procyclical?," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 837-78, October. [Downloadable!] (restricted)
  16. Guido Schwerdt, 2008. "Labor Turnover before Plant Closure: ‘Leaving the Sinking Ship’ vs. ‘Captain Throwing Ballast Overboard’," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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