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Two-Sided Learning, Labor Turnover, and Worker Displacement

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Author Info
Gerard A. Pfann
Daniel S. Hamermesh

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Abstract

We remedy several deficiencies in the recent literature on job loss while modernizing the very early job-displacement literature. After constructing a structural model of two-sided learning between a firm and its workers, we estimate it using personnel data from Fokker Aircraft in the Netherlands that cover the path of layoffs and quits up to and including its bankruptcy in March 1996. We find that the firm learns about the workers’ loyalty (demonstrating the role of information in repeated principal-agent relationships), while workers do not learn (consistent with earlier empirical results on American workers). The type of data that we use also generates information on the value of learning and on whether and how the characteristics of workers who remain until the firm’s death differ from those of all of its affected workers. It thus allows us to infer the extent of biases in measuring the losses arising from displacement if the sample is restricted to displaced workers.

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Paper provided by Harris School of Public Policy Studies, University of Chicago in its series Working Papers with number 0021.

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Date of creation: Oct 2000
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Handle: RePEc:har:wpaper:0021

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Related research
Keywords: two-sided learning; labor turnover; worker displacement;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February. [Downloadable!] (restricted)
  2. Farber, Henry S & Gibbons, Robert, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1007-47, November. [Downloadable!] (restricted)
  3. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-48, September. [Downloadable!] (restricted)
  4. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
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  5. Pfann, Gerard A., 2001. "Options to quit," Economics Letters, Elsevier, vol. 70(2), pages 259-265, February. [Downloadable!] (restricted)
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  6. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 50(1), pages 5-16, October.
  7. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September. [Downloadable!] (restricted)
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  8. Pfann, Gerald A. & Verspagen, Bart, 1989. "The structure of adjustment costs for labour in the Dutch manufacturing sector," Economics Letters, Elsevier, vol. 29(4), pages 365-371. [Downloadable!] (restricted)
  9. Burda, Michael C. & Mertens, Antje, 2001. "Estimating wage losses of displaced workers in Germany," Labour Economics, Elsevier, vol. 8(1), pages 15-41, January. [Downloadable!] (restricted)
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  10. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 48-71, January. [Downloadable!] (restricted)
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  11. Francine D. Blau & Larry M. Kahn, 1981. "Race and sex differences in quits by young workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 34(4), pages 563-577, July.
  12. Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, vol. 73(5), pages 912-27, December. [Downloadable!] (restricted)
  13. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May. [Downloadable!] (restricted)
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  14. McLaughlin, Kenneth J, 1991. "A Theory of Quits and Layoffs with Efficient Turnover," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 1-29, February. [Downloadable!] (restricted)
  15. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June. [Downloadable!] (restricted)
  16. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 51-75, February. [Downloadable!] (restricted)
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  17. Felli, Leonardo & Harris, Christopher, 1996. "Learning, Wage Dynamics, and Firm-Specific Human Capital," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 838-68, August. [Downloadable!] (restricted)
  18. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
  19. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning And Statistical Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 313-350, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Del Bono, Emilia & Weber, Andrea & Winter-Ebmer, Rudolf, 2008. "Clash of Career and Family. Fertility Decisions after Job Displacement," Economics Series 222, Institute for Advanced Studies. [Downloadable!]
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  2. repec:ese:iserwp: is not listed on IDEAS
  3. Kristiina Huttunen & Jarle Møen & Kjell G. Salvanes, 2006. "How Destructive Is Creative Destruction? The Costs of Worker Displacement," IZA Discussion Papers 2316, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Kenneth A. Counch, 2003. "Job Matching and Wage Growth in the U.S. and Germany," Working papers 2003-10, University of Connecticut, Department of Economics. [Downloadable!]
  5. Guido Schwerdt, 2007. "Labor Turnover before Plant Closure:'Leaving the sinking ship' vs. 'Captain throwing ballast overboard'," Economics Working Papers ECO2007/22, European University Institute. [Downloadable!]
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  6. Gerard A. Pfann, 2001. "Downsizing," Working Papers 0110, Harris School of Public Policy Studies, University of Chicago. [Downloadable!]
    Other versions:
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