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Do Local Managers Give Labor An Edge?

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  • Scott E. Yonker

Abstract

Based on the psychological theory of place attachments, native local managers should be more rooted in their communities than non-locals and should act accordingly. Consistent with this, local managers are 33% less likely to lay of employees than their non-local industry peers following industry distress. Additionally, when managers are forced to lay off employees, establishments near managers' homes are less likely to experience layoffs than those located elsewhere. Locals pay for these higher employment levels by spending cash, cutting investment, and selling assets. While there is no direct evidence that labor-friendly policies of locals have a differential impact on firm performance or value, only locals with weaker incentives implement these policies, suggesting that favoritism by locals may be suboptimal. Taken together these results suggest that managerial preferences impact corporate employment decisions.

Suggested Citation

  • Scott E. Yonker, 2013. "Do Local Managers Give Labor An Edge?," Working Papers 13-16, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:13-16
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    File URL: https://www2.census.gov/ces/wp/2013/CES-WP-13-16.pdf
    File Function: First version, 2013
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    Cited by:

    1. Andrea Bassanini & Giorgio Brunello & Eve Caroli, 2017. "Not in My Community: Social Pressure and the Geography of Dismissals," Journal of Labor Economics, University of Chicago Press, vol. 35(2), pages 429-483.
    2. Scott E. Yonker, 2017. "Geography and the Market for CEOs," Management Science, INFORMS, vol. 63(3), pages 609-630, March.
    3. repec:dau:papers:123456789/13579 is not listed on IDEAS

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