Leavers and Stayers after Mass Layoffs: Evidence from Brazil

Advisor: Carlos Viana de Carvalho

Co-advisor: Gustavo Gonzaga

We estimate the impacts of job loss on individuals’ labor and credit market outcomes, exploiting detailed individual-level  administrative data linking employment and credit histories. Leveraging mass layoffs for identification, we find job loss leads to sizable and pervasive declines in wages, future employment probabilities, and spending. We document evidence consistent with declining credit access following job loss, limiting workers’ ability to partially selfinsure their losses. Facing limited options for managing liquidity, workers, on average, resort more to not paying their credit card balances in full to finance consumption. The findings point that the costs of job loss may be further amplified in a developing country due to comparatively less developed credit markets. In addition, we benefit from the quasi-experimental variation provided by mass layoffs to study the behavior of job stayers, who would possibly perceive heightened income uncertainty. We document this group faces actual increased layoff risk, and those who do not exhibit hand-to-mouth behavior cut down spending in the aftermath of mass layoffs in their firms.