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Heterogeneity among Displaced Workers

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Author Info

  • Pfann, Gerard A

    (I.Z.A. Bonn)

  • Ben Kriechel

Abstract

We combine post-displacement survey data with information from a displacing firm's personnel files in order to reveal sources of worker heterogeneity in search time and wage losses. First, we detail how experience-related characteristics affect workers' labour market careers during a period of three years after the bankruptcy of the firm. We find that wage losses are large. Interestingly, firm, rank, or job tenure do not explain observed wage differences. Idiosyncratic ability, job rotations prior to displacement, and differences in pre- and post-displacement job characteristics contribute most to observed variations in wages. The individual post-displacement labor market histories allow for testing the Blanchard-Diamond (1994) ranking model for which we find no support. We then develop a dynamic reservation wage updating model. The method of updating is based on the simple idea that job seekers are informed about successful matches of their former colleagues (Rees, 1966; Granovetter, 1974). The model fits the data well.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 164.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:164

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Web page: http://www.res.org.uk/society/annualconf.asp
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Keywords: idiosyncratic ability; mass lay-off; social networks; unemployment;

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Cited by:
  1. Grip, Andries de, 2006. "Evaluating human capital obsolescence," Open Access publications from Maastricht University urn:nbn:nl:ui:27-17960, Maastricht University.
  2. Inés P. Murillo, 2011. "Human capital obsolescence: some evidence for Spain," International Journal of Manpower, Emerald Group Publishing, vol. 32(4), pages 426-445, July.
  3. Kaplan, David & Martinez, Gabriel & Robertson, Raymond, 2005. "What Happens to Wages After Displacement?," MPRA Paper 3079, University Library of Munich, Germany.
  4. Ben Kriechel & Gerard Pfann, 2005. "The role of specific and general human capital after displacement," Education Economics, Taylor and Francis Journals, vol. 13(2), pages 223-236.
  5. Machikita, Tomohiro, 2006. "Career Crisis? Impacts of Financial Shock on the Entry-Level Labor Market: Evidence from Thailand," IDE Discussion Papers 83, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  6. Tom Broekel & Ron Boschma, 2009. "Knowledge networks in the Dutch aviation industry: the proximity paradox," Papers in Evolutionary Economic Geography (PEEG) 0915, Utrecht University, Section of Economic Geography, revised Oct 2009.

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