IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Layoffs and Litigation

Listed author(s):
  • Paul Oyer
  • Scott Schaefer

This paper studies a possible link between two trends that have affected the labor market over the last decade: increases in wrongful termination litigation and increasing frequency of mass layoffs. We model the displacement strategy of a firm faced with concave displacement costs and employees who vary in productivity. The firm has some periods of "layoffs," where it displaces a relatively large group, and other periods where it engages in selective "firings" of only the least productive employees. We show that layoffs and firings are substitutes and that the set of steady-state policies shifts in the direction of smaller firings and larger layoffs as the cost of firings increases. We explore the relationship between displacement costs and layoff size by considering potential effects of the Civil Rights Act (CRA) of 1991. By increasing most firms' exposure to wrongful termination lawsuits, this legislation made displacements of smaller groups of workers more costly without proportionately affecting the costs of large layoffs. Using data from the Survey of Income and Program Participation (SIPP), we explore the effects of CRA91 using variation in protected status (specifically, race), state Fair Employment Laws, age, and employer size. We find evidence suggesting that CRA91 affected firms' choices about how to displace workers and had especially strong effects on the firing rates of black men.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Institute for Policy Resarch at Northwestern University in its series IPR working papers with number 98-34.

in new window

Date of creation:
Handle: RePEc:wop:nwuipr:98-34
Contact details of provider: Postal:
2040 Sheridan Road, Evanston, IL 60208-4100

Phone: 847-491-8712
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

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

When requesting a correction, please mention this item's handle: RePEc:wop:nwuipr:98-34. See general information about how to correct material in RePEc.

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

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.