The Effect of Advance Notification of Plant Closings on Unemployment

Abstract

Using data from the 1984 Displaced Worker Survey, the authors model the determinants of time without work following job displacement for a large sample of workers laid off because of plant shutdowns between 1979 and 1984. The major focus of the paper is on the role of advance notification in mitigating unemployment. The estimating procedure accommodates right censored observations stemming from continuing or open-ended spells of unemployment. Advance notification is found to have significantly reduced the duration of unemployment of those notified workers who did not draw unemployment insurance benefits and, in particular, of those who left the plant prior to termination. Advance notice had much less effect on the time without work of notified workers whose spell length of unemployment was long enough for them to collect unemployment insurance benefits.