Labor Turnover Before Plant Closure: 'Leaving the Sinking Ship' vs. 'Captain Throwing Ballast Overboard'

By Guido Schwerdt. Social Science Research Network, 2008

161 citations recorded by the source corpus.

Involuntary job loss in administrative data is commonly identified by focusing on mass-layoffs or plant closures. However, such events usually do not happen without prior knowledge, which potentially leads to selection in the labor turnover of distressed firms. We find that workers separating from closing plants up to 2 quarters before closure are associated with significantly lower displacement costs and on average significantly higher pre-closure earnings levels as opposed to ultimately displaced workers. Furthermore, our results indicate that displaced workers with high pre-closure earnings experience significantly lower reductions in future employment probabilities. These findings suggest that compositional differences cause estimated displacement costs to differ between early leavers and ultimately displaced workers. Focusing exclusively on the latter group would lead to a serious overestimation of displacement costs.

Subfields: Economics and Econometrics, General Health Professions

View Paper: https://www.semanticscholar.org/paper/35a7d9461f5c4cea3e54eec9ee5f1341710ea2e2

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Citations in the corpus

Too Old to Work, Too Young to Retire? (2017, background): “A general disadvantage with the use of supervisors’ ratings to rank individuals by age and productivity is that managers often may wish to reward older workers for their loyalty and past achievements (Skirbekk (2004)).”
The impact of job loss on family dissolution (2012, background): “There is some dispute about the treatment of plant closures as exogenous ( Schwerdt 2007 ).”
Establishment exits in Germany: the role of size and age (2012, background): “8 A detailed discussion of the literature dealing with Gibrat’s Law is far beyond the scope of this paper; see Sutton (1997) for a survey of the theory and Santarelli et al.”