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Lingering illness or sudden death? Pre-exit employment developments in German establishments

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  • Fackler, Daniel
  • Schnabel, Claus
  • Wagner, Joachim

Abstract

Using a large administrative dataset for Germany, this paper compares employment developments in exiting and surviving establishments. For both West and East Germany we find a clear 'shadow of death' effect reflecting lingering illness: establishments shrink dramatically already several years before closure, employment growth rates differ strongly between exiting and surviving establishments, and this difference becomes stronger as exit approaches. We further show that prior to exit the workforce becomes on average more skilled, more female and older in exiting compared to surviving establishments. These effects are more clearly visible in West than in East Germany. Our results also hold when applying a matching approach.

Suggested Citation

  • Fackler, Daniel & Schnabel, Claus & Wagner, Joachim, 2012. "Lingering illness or sudden death? Pre-exit employment developments in German establishments," Discussion Papers 82, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    • Handle: RePEc:zbw:faulre:82
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    Cited by:

    1. Fackler, Daniel & Müller, Steffen & Stegmaier, Jens, 2018. "Plant-level employment development before collective displacements: comparing mass layoffs, plant closures and bankruptcies," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 50(50), pages 5416-5435.
    2. Power Bernadette & Ryan Geraldine & Doran Justin, 2020. "A micro-analysis of Irish firm deaths during the financial crisis (2006–2010)," The Irish Journal of Management, Sciendo, vol. 39(1), pages 1-16, August.
    3. Oberfichtner, Michael, 2013. "Works council introductions: Do they reflect workers' voice?," Discussion Papers 83, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    4. Alm Bastian & Engel Dirk & Weyh Antje, 2014. "Does Switching to a Western German Employer Still Pay Off?: An Analysis for Eastern Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(5), pages 546-571, October.
    5. Fackler, Daniel & Schnabel, Claus, 2013. "Survival of Spinoffs and Other Startups: First Evidence for the Private Sector in Germany, 1976-2008," IZA Discussion Papers 7542, Institute of Labor Economics (IZA).
    6. Michaela Fuchs & Antje Weyh, 2014. "The pre-exit performance of German plants - How long is the 'shadow of death'?," ERSA conference papers ersa14p1644, European Regional Science Association.
    7. Alex Coad & Masatoshi Kato, 2021. "Growth paths and routes to exit: 'shadow of death' effects for new firms in Japan," Small Business Economics, Springer, vol. 57(3), pages 1145-1173, October.
    8. Schröpf, Benedikt, 2021. "The dynamics of wage dispersion between firms: The role of firm entry and exit," Discussion Papers 120, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

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    More about this item

    Keywords

    Firm exits; shadow of death; Germany;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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