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When a Door Closes a Window Opens? Investigating the Effects of Involuntary Separations

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  • Simone Balestra

    ()
    (Department of Business Administration, University of Zurich)

  • Uschi Backes-Gellner

    ()
    (Department of Business Administration, University of Zurich)

Abstract

Using Swiss Labor Force Survey data, the authors estimate the earning losses of workers experiencing an involuntary job separation. The authors follow two empirical approaches: the method usually applied in the literature (fixed-effects estimation) and a new approach (Poisson-pseudo-maximum-likelihood estimation) that allows considering the full set of involuntary separations, including those with zero labor market earnings. Using the first method, the authors estimate an immediate loss of about 10 percent, a loss remaining statistically significant up to four years after separation. Using the second approach, the authors estimate a loss of 41 percent in the year of separation and a loss of about 19 percent four years after separation. These larger estimates embed the total productivity loss caused by an involuntary separation. Compared to other reasons for separation, the earning loss pattern is unique for involuntary separations, because no other type of separation implies such permanent scarring.

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File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0072_lhwpaper.pdf
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Bibliographic Info

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0072.

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Length: 39 pages
Date of creation: Feb 2012
Date of revision: Aug 2013
Handle: RePEc:iso:educat:0072

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Keywords: Involuntary separation; earning losses; PPML;

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  1. Jacobson, Louis & LaLonde, Robert J. & Sullivan, Daniel G., 2004. "Estimating the Returns to Community College Schooling for Displaced Workers," IZA Discussion Papers 1017, Institute for the Study of Labor (IZA).
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  16. Louis Jacobson & Robert J. LaLonde & Daniel Sullivan, 2005. "The impact of community college retraining on older displaced workers: Should we teach old dogs new tricks?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 398-415, April.
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