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Industry shutdown rates and permanent layoffs: evidence from firm-worker matched data

Kim Huynh (), Yuri Ostrovsky, Robert Petrunia () and Marcel Voia

IZA Journal of Labor Economics, 2017, vol. 6, issue 1, 1-31

Abstract: Abstract Firm shutdown creates a turbulent situation for workers as it leads directly to layoffs for its workers. An additional consideration is whether a firm’s shutdown within an industry creates turbulence for workers at other continuing firms. Using data drawn from the Longitudinal Worker File, a Canadian firm-worker matched employment database, we investigate the impact of industry shutdown rates on workers at continuing firm. This paper exploits variation in shutdown rates across industries and within an industry over time to explain the rate of permanent layoffs and the growth of workers’ earnings. We find an increase in industry shutdown rates increases the probability of permanent layoffs and decreases earnings growth for workers at continuing firms.

Keywords: Worker separation; Firm survival; Selection (search for similar items in EconPapers)
JEL-codes: J24 J31 J63 C35 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1186/s40172-017-0057-0

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Handle: RePEc:spr:izalbr:v:6:y:2017:i:1:d:10.1186_s40172-017-0057-0