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The Duration of Unemployment and the Persistence of Wages

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  • Leonard, Jonathan
  • Van Audenrode, Marc

Abstract

In this paper we examine the persistent effects of past wages of displaced workers on the probability of finding a new job and on wages in the new job. We use a new database looking at the post-displacement experience of a sample of Belgian workers who have lost their jobs because of a sizeable reduction in the work-force of their firm. We decompose past wages into a market return to human capital, a firm-specific component (the `firm effect'), and an individual component. We develop an information model of wages and test its predictions. These predictions are validated by the evidence on subsequent wages. We also find that spells of unemployment are long, but that re-employed workers suffer limited wage losses on re-employment. This suggests that some institutional constraints prevent wages from falling.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1227.

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Date of creation: Aug 1995
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Handle: RePEc:cpr:ceprdp:1227

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Related research

Keywords: Displaced Workers; Unemployment Duration; Wages;

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Cited by:
  1. Amynah Vanessa Gangji & Robert Plasman, 2007. "The Matthew effect of unemployment: how does it affect wages in Belgium," DULBEA Working Papers 07-19.RS, ULB -- Universite Libre de Bruxelles.
  2. Arnaud Lefranc, 2003. "Labor Market Dynamics and Wage Losses of Displaced Workers in France and the United States," William Davidson Institute Working Papers Series 2003-614, William Davidson Institute at the University of Michigan.
  3. Luigi Aldieri, 2009. "The Effects of Unemployment Experiences on Subsequent Wages in Italy," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 52(2), pages 109-119.
  4. Burda, Michael C. & Mertens, Antje, 1999. "Estimating wage losses of displaced workers in Germany," SFB 373 Discussion Papers 1999,35, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  5. Olivia Ekert-Jaffé & Isabelle Terraz, 2011. "The scarring effect of unemployment in ten European countries : an analysis based on the ECHP," Working Papers of BETA 2011-09, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  6. Arnaud Lefranc, 2000. "Wage Losses of Displaced Workers in France and the US?," Econometric Society World Congress 2000 Contributed Papers 1566, Econometric Society.

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