Layoffs, Lemons, Race and Gender

Luojia Hu and Christopher Taber ()
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Christopher Taber: University of Wisconsin-Madison

No 1702, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper expands on Gibbons and Katz (1991) by looking at how the difference in wage losses across plant closing and layoff varies with race and gender. We find that the differences between white males and the other groups are striking and complex. The lemons effect of layoff holds for white males as in Gibbons and Katz model, but not for the other three demographic groups (white females, black females, and black males). These three all experience a greater decline in earnings at plant closings than at layoffs. This results from two reinforcing effects. First, plant closings have substantially more negative effects on minorities than on whites. Second, layoffs seem to have more negative consequences for white men than the other groups. We also find that the relative wage losses of blacks following layoffs increased after the Civil Rights Act of 1991 which we take as suggestive of an informational effect of layoff as in Gibbons and Katz. The results are suggestive that the large losses that African Americans experience at plant closing could result from heterogeneity in taste discrimination across firms.

Keywords: discrimination; asymmetric information; displaced workers; racial and gender wage gap; heterogenous human capital (search for similar items in EconPapers)
JEL-codes: J6 J7 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2005-08
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (5)

Published - substantially revised version published as `Displacement, Asymmetric Information and Heterogeneous Human Capita' in: Journal of Labor Economics, 2011, 29 (1), 113-152.

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Working Paper: Layoffs, Lemons, Race, and Gender (2005)
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