Not in My Community: Social Pressure and the Geography of Dismissals

Andrea Bassanini, Giorgio Brunello and Eve Caroli

No 8910, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate the role of local social pressure in shaping the geographical pattern of firms' firing decisions. Using French linked employer-employee data, we show that social pressure exerted by the local communities where firms' headquarters are located induces CEOs to refrain from dismissing at short distance from their headquarters. More specifically, we find that, within firms, secondary establishments located further away from headquarters have higher dismissal rates than those located closer, taking into account the possible endogeneity of plant location. We also find that the positive effect of distance on dismissals increases with the visibility of the firm in the local community of its headquarters. These effects are stronger the greater the degree of selfishness of the community in which the headquarters are located. This suggests that local social pressure at headquarters is a key determinant of the positive relationship between distance to headquarters and dismissals. We show that our results cannot be entirely accounted for by alternative explanations of the distance-dismissal relationship that are put forward in the literature – e.g. monitoring costs or asymmetric information.

Keywords: layoffs; social pressure; firm visibility; distance to headquarters; adjustment costs; selfishness (search for similar items in EconPapers)
JEL-codes: J23 J63 M51 R12 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2015-03
New Economics Papers: this item is included in nep-eur, nep-geo, nep-lab, nep-lma, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - revised version published in: Journal of Labor Economics, 2017, 35 (2), 429-483

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Related works:
Journal Article: Not in My Community: Social Pressure and the Geography of Dismissals (2017)
Working Paper: Not in my Community: Social Pressure and the Geography of Dismissals (2017)
Working Paper: Not in my Community: Social Pressure and the Geography of Dismissals (2017)
Working Paper: Not in my Community: Social Pressure and the Geography of Dismissals (2017)
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