Job Market Paper
Abstract: This paper examines the spillover effects of mass layoffs on neighboring establishments. Leveraging comprehensive geocoded administrative data encompassing all entities in California, this research examines the indirect effects of mass layoffs on employment, wages, and the dynamics of establishments' entry and exit. I exploit the geographic coordination of establishments to define treatment and control areas based on their proximity to instances of mass layoffs. The findings unveil persistent and adverse spillover effects on local employment levels within these areas four years after the events, coupled with a net decrease in operational establishments. However, there is no significant change in average wages. Furthermore, empirical evidence demonstrates a diminishing spillover impact with increasing spatial separation, with the effect of fading away after 6km. Ultimately, this paper contributes empirical evidence on the mechanisms of agglomeration economies that underlie the spillover effects, with industries closely interlinked to the event establishment exhibiting more pronounced employment loss.