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Using linked employer-employee data to investigate the speed of adjustments in downsizing firms

Kevin McKinney and Lars Vilhuber ()

Longitudinal Employer-Household Dynamics Technical Papers from Center for Economic Studies, U.S. Census Bureau

Abstract: When firms are faced with a demand shock, adjustment can take many forms. Firms can adjust physical capital, human capital, or both. The speed of adjustment may differ as well: costs of adjustment, the type of shock, the legal and economic enviroment all matter. In this paper, we focus on firms that downsized between 1992 and 1997, but ultimately survive, and investigate how the human capital distribution within a firm influences the speed of adjustment, ceteris paribus. In other words, when do firms use mass layoffs instead of attrition to adjust the level of employment. We combine worker-level wage records and measures of human capital with firm-level characteristics of the production function, and use levels and changes in these variables to characterize the choice of adjustment method and speed. Firms are described/compared up to 9 years prior to death. We also consider how workers fare after leaving downsizing firms, and analyze if observed differences in post-separation outcomes of workers provide clues to the choice of adjustment speed.

Pages: 29 pages
Date: 2006-05
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https://www2.census.gov/ces/tp/tp-2006-03.pdf First version, 2006 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:tpaper:2006-03

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