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Workers’ participation in regional economic change following establishment closure

Lars-Fredrik Andersson (), Therese Danley (), Rikard Eriksson () and Martin Henning ()
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Lars-Fredrik Andersson: Umeå University
Therese Danley: Umeå University
Rikard Eriksson: Umeå University
Martin Henning: University of Gothenburg

Small Business Economics, 2020, vol. 54, issue 2, No 14, 589-604

Abstract: Abstract This article analyses if and when workers affected by economic destruction in the form of establishment closures move to more productive or newly started establishments in the region, become self-employed, leave the region or become displaced. Results from multinominal probit models show that the majority of these workers face destructive employment outcomes from a Schumpeterian point of view compared to a matched sample of workers not subject to a closure. However, we do find indications of a creative destruction as a small, albeit significant, share become employed in young establishments. Different types of human capital influence the likelihood of triggering positive or negative regional outcomes. While higher education significantly decreases the risk for unemployment, high-income earners more often become engaged in creative outcomes. Firm tenure increases the likelihood of becoming employed in younger establishments. There are significant spatial differences where metropolitan regions excel as loci of creative change, whereas smaller and peripheral regions face far less creative outcomes of economic transformation.

Keywords: Creative destruction; Establishment closure; Worker reallocation; Regional transformation (search for similar items in EconPapers)
JEL-codes: R11 J63 L26 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11187-018-0036-2

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