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Labor Market Networks and Recovery from Mass Layoffs: Evidence from the Great Recession Period

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  • Judith K. Hellerstein
  • Mark J. Kutzbach
  • David Neumark
Abstract
We measure the changing efficacy of neighborhood-based labor market networks, across the business cycle, in helping displaced workers become re-employed, focusing on the periods before, during, and just after the Great Recession. Networks can only be effective when hiring is occurring, and hiring varied greatly between 2005 and 2012, the period we study. We therefore focus on a measure of the strength of the labor market networks that includes not only the number of employed neighbors of a laid off worker, but also the gross hiring rate at that person’s neighbors’ workplaces. Our evidence indicates that local labor market networks increase re-employment following mass layoffs, and in particular, that networks serve to markedly increase the probability of re-employment specifically at neighbors’ employers. This is especially true for low-earnings workers. Moreover, although hiring and employment rates decreased during the Great Recession period, the productivity of labor market networks in helping to secure re-employment for laid off workers was remarkably stable during our sample period.

Suggested Citation

  • Judith K. Hellerstein & Mark J. Kutzbach & David Neumark, 2015. "Labor Market Networks and Recovery from Mass Layoffs: Evidence from the Great Recession Period," NBER Working Papers 21262, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21262
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    Cited by:

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    2. Marcelo Arbex & Dennis O'Dea & David Wiczer, 2019. "Network Search: Climbing The Job Ladder Faster," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(2), pages 693-720, May.
    3. Lena Hensvi & Dagmar Müller & Oskar Nordström Skans, 2023. "Connecting the Young: High School Graduates’ Matching to First Jobs in Booms and Great Recessions," The Economic Journal, Royal Economic Society, vol. 133(652), pages 1466-1509.
    4. Ángel L. Martín‐Román & Jaime Cuéllar‐Martín & Alfonso Moral, 2020. "Labor supply and the business cycle: The “bandwagon worker effect”," Papers in Regional Science, Wiley Blackwell, vol. 99(6), pages 1607-1642, December.
    5. William J. Carrington & Bruce Fallick, 2017. "Why Do Earnings Fall with Job Displacement?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(4), pages 688-722, October.
    6. Ben Ost & Weixiang Pan & Douglas A. Webber, 2023. "College Networks and Re-employment of Displaced Workers," Finance and Economics Discussion Series 2023-043, Board of Governors of the Federal Reserve System (U.S.).
    7. Krolikowski, Pawel & Zabek, Mike & Coate, Patrick, 2020. "Parental proximity and earnings after job displacements," Labour Economics, Elsevier, vol. 65(C).
    8. John C. Haltiwanger & Mark J. Kutzbach & Giordano Palloni & Henry O. Pollakowski & Matthew Staiger & Daniel H. Weinberg, 2020. "The Children of HOPE VI Demolitions: National Evidence on Labor Market Outcomes," Working Papers 20-39, Center for Economic Studies, U.S. Census Bureau.
    9. Gyetvai, Attila & Zhu, Maria, 2021. "Coworker Networks and the Role of Occupations in Job Finding," IZA Discussion Papers 14615, Institute of Labor Economics (IZA).
    10. Brian Asquith & Judith K. Hellerstein & Mark J. Kutzbach & David Neumark, 2021. "Social capital determinants and labor market networks," Journal of Regional Science, Wiley Blackwell, vol. 61(1), pages 212-260, January.

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    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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