Lingering Illness or Sudden Death? Pre-Exit Employment Developments in German Establishments

26 Pages Posted: 22 Dec 2012

See all articles by Daniel Fackler

Daniel Fackler

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

Joachim Wagner

University of Lueneburg - Institute of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; IZA Institute of Labor Economics

Abstract

Using a large administrative dataset for Germany, this paper compares employment developments in exiting and surviving establishments. For both West and East Germany we find a clear "shadow of death" effect reflecting lingering illness: establishments shrink dramatically already several years before closure, employment growth rates differ strongly between exiting and surviving establishments, and this difference becomes stronger as exit approaches. We further show that prior to exit the workforce becomes on average more skilled, more female and older in exiting compared to surviving establishments. These effects are more clearly visible in West than in East Germany. Our results also hold when applying a matching approach.

Keywords: firm exits, shadow of death, Germany

JEL Classification: L2, D22, J65

Suggested Citation

Fackler, Daniel and Schnabel, Claus and Wagner, Joachim, Lingering Illness or Sudden Death? Pre-Exit Employment Developments in German Establishments. IZA Discussion Paper No. 7081, Available at SSRN: https://ssrn.com/abstract=2192857

Daniel Fackler (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics ( email )

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Nuernberg, D-90403
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Claus Schnabel

University of Erlangen-Nuremberg ( email )

Institut für Wirtschaftsforschung
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IZA Institute of Labor Economics

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Joachim Wagner

University of Lueneburg - Institute of Economics ( email )

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IZA Institute of Labor Economics

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