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Title:Labor turnover before plant closure: leaving the sinking ship vs. captain throwing ballast overboard PDF Logo
Authors:Schwerdt, Guido
Issue Date:2008
Series/Report no.:CESifo working paper 2252
Abstract: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.
Subjects:plant closure
labor turnover
exact-matching
employer-employee data
JEL:J63
J65
C21
C23
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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