The Link between Human Capital, Mass Layoffs, and Firm Deaths

John M. Abowd, Kevin L. McKinney and Lars Vilhuber

in Producer Dynamics

Published by University of Chicago Press

Published in print March 2009 | ISBN: 9780226172569
Published online February 2013 | e-ISBN: 9780226172576 | DOI:
The Link between Human Capital, Mass Layoffs, and Firm Deaths

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This chapter uses the Longitudinal Employer-Household Dynamics (LEHD) data set to assess the human capital embodied in a firm's workforce and relate it to the performance of the firm. It observes that mass layoffs and firm failure are much more likely in firms with a large proportion of low human capital workers. Firms that do not fail generally upgrade the human capital of their workforce. Moreover, firms with a single displacement event are more likely to die. A single displacement event is linked with a significant reduction in the upskilling of the continuing firm's workforce. Furthermore, the analysis indicates that firms that disproportionately employ workers in the highest quartile of the skill distribution are less likely to close, even given a displacement event, than are other firms that experience displacement events.

Keywords: human capital; upskilling; firm failure; mass layoffs; workforce; single displacement event

Chapter.  9631 words. 

Subjects: Microeconomics

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