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Wages And The Risk Of Plant Closing

Author

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  • DUNNE, T.
  • ROBERTS, M.J.

Abstract

This paper examines the empirical relationship between the probability a plant closes and the compensation paid to the employees in the plant. The paper uses data on over 6500 manufacturing plants from the LRD to estimate the market hedonic wage locus and the probability of plant failure. The empirical results reported in this paper indicate that the probability of plant failure is systematically related to the plant’s market share, age, recent growth, and variable cost to revenue ratio. The market hedonic wage regression indicates that workers employed by multi-plant firms earn a positive compensating wage differential for the risk of plant closing but workers employed in single-plant firms do not. Additionally, the paper provides evidence on the general pattern of wage variation across heterogeneous employers. Establishment wage rates are significantly affected by plant size, age, geographic location, industry, capital intensity, and value added per worker.
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Suggested Citation

  • Dunne, T. & Roberts, M.J., 1990. "Wages And The Risk Of Plant Closing," Papers 6-90-2, Pennsylvania State - Department of Economics.
  • Handle: RePEc:fth:pensta:6-90-2
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    Cited by:

    1. Anabela Carneiro & Pedro Portugal, 2003. "Wages and the Risk of Displacement," Working Papers w200310, Banco de Portugal, Economics and Research Department.
    2. Charles Brown & James L. Medoff, 2003. "Firm Age and Wages," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 677-698, July.
    3. Yoonsoo Lee, 2006. "Relocation patterns in U.S. manufacturing," Working Paper 0624, Federal Reserve Bank of Cleveland.
    4. Adela Luque & Javier Miranda, 2000. "Technology Use and Worker Outcomes: Direct Evidence from Linked Employee-Employer Data," Working Papers 00-13, Center for Economic Studies, U.S. Census Bureau.
    5. Luiz A. Esteves, 2008. "Risk of Firm Closure and Wages in Brazil: Compensating Wage Di erentials or Bargaining Concessions?," Working Papers 0077, Universidade Federal do Paraná, Department of Economics.
    6. Addison, John T. & Heywood, John S. & Wei, Xiangdong, 2001. "Unions and Plant Closings in Britain: New Evidence from the 1990/98 WERS," IZA Discussion Papers 352, Institute for the Study of Labor (IZA).
    7. Peter Thompson & Mihaela Pintea, 2008. "Sorting, Selection, and Industry Shakeouts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(1), pages 23-40, August.
    8. Krause, M.U., 2002. "Inter-Industry Wage Differentials and Job Flows," Discussion Paper 2002-3, Tilburg University, Center for Economic Research.
    9. Ron Jarmin, 1999. "Government Technical Assistance Programs* And Plant Survival: The Role Of Plant Ownership Type," Working Papers 99-2, Center for Economic Studies, U.S. Census Bureau.
    10. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
    11. Kevin McKinney & Lars Vilhuber, 2006. "Using linked employer-employee data to investigate the speed of adjustments in downsizing firms," Longitudinal Employer-Household Dynamics Technical Papers 2006-03, Center for Economic Studies, U.S. Census Bureau.
    12. Sang V. Nguyen & Michael Ollinger, 2009. "Mergers and acquisitions, employment, wages, and plant closures in the U.S. meat product industries," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 70-89.
    13. Timothy Dunne & James A Schmitz Jr., 1992. "Wages, Employer Size-Wage Premia and Employment Structure: Their Relationship to Advanced-Technology Usage at U.S. Manufacturing Establishments," Working Papers 92-15, Center for Economic Studies, U.S. Census Bureau.

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