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The Echo of Job Displacement

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  • Eliason, Marcus

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Storrie, Donald

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

In this paper we examine the long-term effects of job displacement due to establishment closures in Sweden on labor market status. Using linked employeremployee data we are able to identify all employees displaced in 1987 and follow them until 1999. The displaced employees are compared to a large random sample of non-displaced employees by using a difference–in–difference matching estimator. We find a rapid and almost total recovery of those displaced in 1987 compared to the control group up to 1990, both with respect to employment and unemployment. However, with the advent of the deep recession in 1990, the two groups again diverge and by the end of the century, the echo of the job loss 13 years earlier had still not subsided. We attribute the longer-term effects to recurrent displacements. Among the various possible explanations of this phenomenon, we focus on short tenure on subsequent jobs which makes the previously displaced vulnerable to further adverse shocks. We cannot precisely identify the significance of short tenure for recurrent displacement but loss of job specific capital or seniority lay-offs rules are the prime candidates.

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File URL: http://hdl.handle.net/2077/2782
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 135.

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Length: 28 pages
Date of creation: 28 Jun 2004
Date of revision:
Handle: RePEc:hhs:gunwpe:0135

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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: Displaced workers; plant closure; linked employer-employee data; propensity score matching; job specific capital;

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References

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  1. David Margolis, 2000. "Worker Displacement in France," Working Papers 2000-01, Centre de Recherche en Economie et Statistique.
  2. Michael Lechner, 2005. "Some practical issues in the evaluation of heterogeneous labour market programmes by matching methods," Labor and Demography 0505006, EconWPA.
  3. Stefan Bender & Christian Dustmann & David Margolis & Costas Meghir, 1999. "Worker displacement in France and Germany," IFS Working Papers W99/14, Institute for Fiscal Studies.
  4. Stevens, Ann Huff, 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 165-88, January.
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  6. Gibbons, Robert & Katz, Lawrence F., 1991. "Layoffs and Lemons," Scholarly Articles 3442782, Harvard University Department of Economics.
  7. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  8. Robert E. Hall & Edward P. Lazear, 1982. "The Excess Sensitivity of Layoffs and Quits to Demand," NBER Working Papers 0864, National Bureau of Economic Research, Inc.
  9. Jeffrey Smith, 2000. "A Critical Survey of Empirical Methods for Evaluating Active Labor Market Policies," UWO Department of Economics Working Papers 20006, University of Western Ontario, Department of Economics.
  10. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
  11. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
  12. Andersson, Fredrik & Vejsiu, Altin, 2001. "Determinants of plant closures in Swedish manufacturing," Working Paper Series 2001:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  13. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
  14. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
  15. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier.
  16. Elster, Jon, 1991. "Local justice : How institutions allocate scarce goods and necessary burdens," European Economic Review, Elsevier, vol. 35(2-3), pages 273-291, April.
  17. Bertil Holmlund, 2003. "The Rise and Fall of Swedish Unemployment," CESifo Working Paper Series 918, CESifo Group Munich.
  18. Boheim, Rene & Taylor, Mark P., 2002. "The search for success: do the unemployed find stable employment?," Labour Economics, Elsevier, vol. 9(6), pages 717-735, December.
  19. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
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Citations

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Cited by:
  1. Huttunen, Kristiina & Moen, Jarle & Salvanes, Kjell G., 2006. "How Destructive Is Creative Destruction? The Costs of Worker Displacement," IZA Discussion Papers 2316, Institute for the Study of Labor (IZA).
  2. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2012. "Losing Heart? The Effect of Job Displacement on Health," NBER Working Papers 18660, National Bureau of Economic Research, Inc.
  3. repec:ese:iserwp:2004-21 is not listed on IDEAS
  4. Nordström Skans, Oskar, 2004. "Scarring effects of the first labour market experience: A sibling based analysis," Working Paper Series 2004:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  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.
  6. Anders Boman, 2011. "Does migration pay? Earnings effects of geographic mobility following job displacement," Journal of Population Economics, Springer, vol. 24(4), pages 1369-1384, October.
  7. Nordström Skans, Oskar & Liljeberg, Linus, 2005. "Causal effects of subsidized career breaks," Working Paper Series 2005:17, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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