The early costs of plant closures: Evidence on lead effects on workers’ subjective and objective outcomes

Abstract

This study investigates the lead effects of future plant closures for prospective displaced workers’ subjective and objective outcomes. We analyze the effects on their forward-looking subjective outcomes (job insecurity, probabilistic expectations of job loss and of job search), a current subjective outcome (job satisfaction), and current objective outcomes (weekly hours of work, earnings). We estimate the causal effect of the knowledge of future plant closure by combining propensity-score matching with fixed-effects difference-in-differences regressions using longitudinal data from the German Socio-Economic Panel (SOEP). Our analysis shows significant lead effects in the year before plant closure. Although wide confidence intervals preclude definitive conclusions, our evidence does not exclude the existence of lead effects two years prior to a plant closure. Additionally, the lead effects do not generally show heterogeneous results based on job position, gender, or immigrant status.