The Earnings Cost of Business Closure in the UK

31 Pages Posted: 6 Dec 2005

See all articles by Alexander Hijzen

Alexander Hijzen

Organization for Economic Co-Operation and Development (OECD)

Richard Upward

University of Nottingham - School of Economics

Peter W Wright

University of Sheffield - Department of Economics

Abstract

In this paper we estimate how much it costs workers when their employer goes out of business. We use a large random 1% sample of all employees in the UK over the period 1994-2003, linked to a large panel of UK enterprises. We compare the wages and earnings of workers whose employer disappears with comparable workers whose employer remains in the sample. We use both conventional regression techniques and propensity score matching to control for observable differences between displaced and non-displaced workers. We find that earnings losses are initially large but generally last less than four or five years. Earnings losses are mainly driven by periods of non-employment rather than wage losses for those who are successful in finding work again.

Keywords: Worker displacement, linked employer-employee data, panel data, matching

JEL Classification: J63, J65, C23

Suggested Citation

Hijzen, Alexander and Upward, Richard and Wright, Peter W, The Earnings Cost of Business Closure in the UK. Available at SSRN: https://ssrn.com/abstract=863945 or http://dx.doi.org/10.2139/ssrn.863945

Alexander Hijzen (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

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France

Richard Upward

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 5151 (Phone)
+44 115 951 4159 (Fax)

Peter W Wright

University of Sheffield - Department of Economics ( email )

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Sheffield, S1 4DT
UNITED KINGDOM

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