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Using linked employer-employee data to investigate the speed of adjustments in downsizing firms

  • Kevin McKinney
  • Lars Vilhuber

When firms are faced with a demand shock, adjustment can take many forms. Firms can adjust physical capital, human capital, or both. The speed of adjustment may differ as well: costs of adjustment, the type of shock, the legal and economic enviroment all matter. In this paper, we focus on firms that downsized between 1992 and 1997, but ultimately survive, and investigate how the human capital distribution within a firm influences the speed of adjustment, ceteris paribus. In other words, when do firms use mass layoffs instead of attrition to adjust the level of employment. We combine worker-level wage records and measures of human capital with firm-level characteristics of the production function, and use levels and changes in these variables to characterize the choice of adjustment method and speed. Firms are described/compared up to 9 years prior to death. We also consider how workers fare after leaving downsizing firms, and analyze if observed differences in post-separation outcomes of workers provide clues to the choice of adjustment speed.

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File URL: ftp://ftp2.census.gov/ces/tp/tp-2006-03.pdf
File Function: First version, 2006
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Longitudinal Employer-Household Dynamics Technical Papers with number 2006-03.

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Length: 29 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:cen:tpaper:2006-03
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  1. Andrew B. Bernard & J. Bradford Jensen, 2002. "The Deaths of Manufacturing Plants," NBER Working Papers 9026, National Bureau of Economic Research, Inc.
  2. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  3. Abowd, John M. & Vilhuber, Lars, 2005. "The Sensitivity of Economic Statistics to Coding Errors in Personal Identifiers," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 133-152, April.
  4. Audra Bowlus & Lars Vilhuber, 2001. "Displaced Workers, Early Leavers, and Re-employment Wages," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20015, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  5. Burgess, Simon & Lane, Julia & Stevens, David, 2000. " The Reallocation of Labour and the Lifecycle of Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(0), pages 885-907, Special I.
  6. Anabela Carneiro & Pedro Portugal, 2003. "Wages and the Risk of Displacement," CEF.UP Working Papers 0308, Universidade do Porto, Faculdade de Economia do Porto.
  7. Paul A. Lengermann & Lars Vilhuber, 2002. "Abandoning the Sinking Ship: The Composition of Worker Flows Prior to Displacement," Longitudinal Employer-Household Dynamics Technical Papers 2002-11, Center for Economic Studies, U.S. Census Bureau.
  8. John M. Abowd & Patrick Corbel & Francis Kramarz, 1999. "The Entry And Exit Of Workers And The Growth Of Employment: An Analysis Of French Establishments," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 170-187, May.
  9. Burgess, Simon & Lane, Julia & Stevens, David, 1995. "Job Flows, Worker Flows and Churning," CEPR Discussion Papers 1125, C.E.P.R. Discussion Papers.
  10. Dunne, T. & Roberts, M.J., 1990. "Wages And The Risk Of Plant Closing," Papers 6-90-2, Pennsylvania State - Department of Economics.
  11. 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," Longitudinal Employer-Household Dynamics Technical Papers 2002-10, Center for Economic Studies, U.S. Census Bureau.
  12. John M. Abowd & Paul A. Lengermann & Kevin L. McKinney, 2002. "The Measurement of Human Capital in the U.S. Economy," Longitudinal Employer-Household Dynamics Technical Papers 2002-09, Center for Economic Studies, U.S. Census Bureau, revised Mar 2003.
  13. Schoeni, R-F & Dardia, M, 1996. "Wage Losses of Displaced Workers in the 1990s," Papers 96-14, RAND - Labor and Population Program.
  14. Parent, Daniel, 2000. "Industry-Specific Capital and the Wage Profile: Evidence from the National Longitudinal Survey of Youth and the Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 306-23, April.
  15. John M. Abowd & Kevin L. McKinney & Lars Vilhuber, 2009. "The Link between Human Capital, Mass Layoffs, and Firm Deaths," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 447-472 National Bureau of Economic Research, Inc.
  16. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
  17. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
  18. Gary Benedetto & John Haltiwanger & Julia Lane & Kevin McKinney, 2003. "Using Worker Flows in the Analysis of the Firm," Longitudinal Employer-Household Dynamics Technical Papers 2003-09, Center for Economic Studies, U.S. Census Bureau, revised May 2004.
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