Friday, July 29, 2005

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[IWS] NBER: Layoffs, Lemons, Race, and Gender (July 2005)

IWS Documented News Service
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Institute for Workplace Studies                   Professor Samuel B. Bacharach
School of Industrial & Labor Relations           Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor                    Stuart Basefsky
New York, NY 10016                        Director, IWS News Bureau
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Layoffs, Lemons, Race, and Gender
http://papers.nber.org/papers/w11481.pdf
[full-text, 29 pages]
Luojia Hu, Christopher Taber
NBER Working Paper No. 11481
Issued in July 2005

---- Abstract -----
http://papers.nber.org/papers/W11481

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.

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