The Economic Performance of Survivors after Layoffs: A Plant-Level Study

Abstract

This study tests for the empirical relationship between layoffs and the economic performance of workers who remain after the layoffs. Previous studies performed in laboratory settings have often found increases in the efficiency of workers after layoffs. This analysis is the first to test for this relationship using operating data from a set of similar establishments. Within the framework of a modified Cobb-Douglas production function, layoffs do not influence subsequent productivity in the establishments in this study's sample. It is also suggested that the seniority systems governing layoffs and the highlevels of capital intensity in these establishments may help explain the difference between the findings in the laboratory studies and those obtained in this analysis.