Big plant closures and local employment

Abstract

This paper estimates the impact of large plant closures on the local employment in the affected industry. Specifically, we examine the closure of 45 large manufacturing plants in Spain which relocated abroad between 2001 and 2006. We run differences-in-differences specifications in which locations that experience a closure are matched to locations with similar pre-treatment employment levels and trends. The results show that when a plant closes, for each job directly lost in the plant closure, only between 0.6 and 0.7 jobs are actually lost in the local affected industry. These effects are driven by employment expansions in local incumbent firms and, to a lesser extent, by the creation of new firms in the local industry.