Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers

Institute for Empirical Research in Economics Working Paper No. 366

33 Pages Posted: 17 Apr 2008

Date Written: April 2008

Abstract

This paper analyzes labor market success of workers who are displaced in boom versus recession periods. Moreover, the empirical analysis contrasts workers from small firms and large firms. The idea is that displacement carries no information about workers' productivity in large firms but is a signal of low productivity in small firms. This signal is stronger when the plant closure occurs in a boom period than in a recession period. Results indicate that the (i) state of the business cycle is important for influence the effect of displacement on labor market success and (ii) the effect differs by the size of the firm. In large firms, displaced workers suffer from larger earning losses when displacement occurs in recession compared to boom, the opposite result is found for workers displaced from small firms.

Keywords: Displaced workers, wage losses, business cycle, size of the firm

JEL Classification: E32, J64, J65

Suggested Citation

Ruf, Oliver, Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers (April 2008). Institute for Empirical Research in Economics Working Paper No. 366, Available at SSRN: https://ssrn.com/abstract=1120767 or http://dx.doi.org/10.2139/ssrn.1120767

Oliver Ruf (Contact Author)

University of Zurich ( email )

Blümlisalpstrasse 10
Zurich 8006
Switzerland

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