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Book

Research in Labor Economics

Vol. 49: Workplace Productivity and Management Practices. Emerald Publishing Limited, 2021.
Zubanov N., Friebel G., Heinz M., Weller I.
Academic editor: S. Polachek, K. Tatsiramos, G. Russo, G. van Houten.

Using data from a retail chain of 193 bakery shops that underwent downsizing, we study the effects of two types of downsizing announcements – closure or sale to another operator – on sales in the affected shops, and how these effects are moderated by job security perceptions. On average, sales in the affected shops go down by 26% after a closure announcement and by 7% after a sale announcement. Sales decline more sharply in shops where employees had higher job security perceptions before the announcement. Our findings are consistent with psychological contract theory: a breach of an implicit contract promising job security in exchange for work effort results in a reciprocal effort withdrawal. We rule out several alternative explanations to our findings.

Research in Labor Economics