Evidence on Adverse Selection and Establishment Size in the Labor Market

Posted: 21 Nov 2002 Last revised: 17 Oct 2011

See all articles by Harry A. Krashinsky

Harry A. Krashinsky

University of Toronto - Centre For Industrial Relations

Date Written: October 17, 2011

Abstract

A commonly suggested explanation for the finding that laid-off workers have greater mean post-displacement earnings losses than workers who lose their jobs through plant closings is that the former are of lower quality than the latter. But there is also an alternative explanation for this result: laid-off workers suffer larger earnings losses because, as a group, they have more to lose in the first place, having been displaced from larger, higher-wage establishments. An analysis of data from the National Longitudinal Survey of Youth confirms this hypothesis. Accounting for establishment size removes virtually all of the difference in wage losses for the two groups of displaced workers.

Keywords: adverse selection, job loss, layoff, plant closing, labour economics

JEL Classification: J00, J63, J65, J30, J31

Suggested Citation

Krashinsky, Harry A., Evidence on Adverse Selection and Establishment Size in the Labor Market (October 17, 2011). Industrial and Labor Relations Review, Vol. 56, No. 1, October 2002, Available at SSRN: https://ssrn.com/abstract=340523

Harry A. Krashinsky (Contact Author)

University of Toronto - Centre For Industrial Relations ( email )

121 St. George Street
Toronto M5S 2E8
Canada
(416) 978-5696 (Phone)

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