Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2001:6: Determinants of plant closures in Swedish manufacturing

Fredrik Andersson () and Altin Vejsiu
Additional contact information
Fredrik Andersson: IFAU - Office of Labour Market Policy Evaluation, Postal: Labour Market Policy Evaluation, P O Box 513, SE-751 20 Uppsala, Sweden
Altin Vejsiu: IFAU - Office of Labour Market Policy Evaluation, Postal: Labour Market Policy Evaluation, P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: We study the derminants of plant closures i Swedish manufacturing using linked employer-employee data. From our theoretical framework we derive and empirically test hypothesis regarding the linkages between the probability of plant failure and: 1) industry-specific characteristics of production and product demand; 2) local labor market conditions; and 3) plant-specific sources of heterogeneity, including the importance of insider mechanisms in wage determination, plant specific human capital, selection mechanisms and technology vintage effects. Our results suggest that all these factors matter in ways that by and large conform to the a priori hypotheses.

Keywords: Plant closures; job reallocation; insider wage determination; selection mechanisms; capital vintage effects; linked employer-employee data

JEL-codes: J21; J23

41 pages, June 15, 2001

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