Discuss possible generalizations of the analysis and the policy implications.

DOWNSIZING AND HETEROGENEOUS FIRING COSTS

The paper is organized as follows.

Section II

Presents the theoretical model of demand for labor with heterogeneous firing costs and productivity. Theoretical predictions concerning idiosyncratic firing thresholds are derived.

Section III

Portrays the data used for the empirical analysis. In

section IV

The econometric model is derived from the theory and is estimated using personnel data from a large firm in demise.

Section V

Calculates the difference in net present value of a firm’s remaining workforce that is downsized randomly or according to the structural model.

Section VI

Discusses possible generalizations of the analysis and the policy implications.

Section VII concludes.