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Plant Closings and the Value of the Firm

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  • Hamermesh, Daniel S

Abstract

Negative product-market shocks reduce wage growth and increase the probability of plant closing. There is a U-shaped relation between th is probability and job tenure that proxies the specific human capital that raises a firm's value. Estimates based on Panel Study of Income Dynamics data for 1977-81 generally support the model. They show that wages grow less rapidly among workers who will subsequently be displaced and imply that large wage concessions reduce the risk of pl ant closing only slightly. Copyright 1988 by MIT Press.

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  • Hamermesh, Daniel S, 1988. "Plant Closings and the Value of the Firm," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 580-586, November.
    • Handle: RePEc:tpr:restat:v:70:y:1988:i:4:p:580-86
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    Cited by:

    1. Anabela Carneiro & Pedro Portugal, 2008. "Wages and the Risk of Displacement," Research in Labor Economics, in: Work, Earnings and Other Aspects of the Employment Relation, pages 251-276, Emerald Group Publishing Limited.
    2. Alexander, John Jr. & Spivey, Michael F., 1997. "The impact of the WARN Act on firm value," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(4), pages 905-921.
    3. Gielen, A. C. & van Ours, J.C., 2006. "Why do Worker-Firm Matches Dissolve?," Other publications TiSEM 8c99a292-9f34-4ce8-8fd9-9, Tilburg University, School of Economics and Management.
    4. Henry S. Farber, 1993. "The Incidence and Costs of Job Loss: 1982-91," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1 Microec), pages 73-132.
    5. Fajnzylber, Pablo & Maloney, William F. & Ribeiro, Eduardo, 2001. "Firm entry and exit, labor demand, and trade reform : evidence from Chile and Colombia," Policy Research Working Paper Series 2659, The World Bank.
    6. Hamermesh, Daniel S., 1999. "LEEping into the future of labor economics: the research potential of linking employer and employee data," Labour Economics, Elsevier, vol. 6(1), pages 25-41, March.

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