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Long-Term Effects of Job Displacement: Evidence from the Panel Study of Income Dynamics

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  • Ann Huff Stevens

Abstract

This paper measures the long-term wage and earnings losses of workers who lose jobs due to plant closings and layoffs, using a fixed-effects estimator to control for unobserved worker characteristics and longitudinal data from the Panel Study of Income Dynamics. The results show large and persistent effects of displacement on average, with earnings and wages falling by 25 and 12 percent in the year after job loss. Six or more years later, earnings and wages remain reduced by approximately nine percent. Multiple job losses are responsible for much of this persistence. Those workers who avoid subsequent displacements experience more rapid recovery, with earnings and wage reductions of one and four percent six or more years after displacement. These multiple job losses are not heavily concentrated among any identifiable group of workers, but instead affect the recovery patterns of workers with a variety of characteristics.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5343.

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Date of creation: Nov 1995
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Publication status: published as "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics (January 1997).
Handle: RePEc:nbr:nberwo:5343

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  1. Gibbons, R. & Katz, L.F., 1989. "Layoffs And Lemons," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 531, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Blanchflower, D., 1989. "Fear, Unemployment And Pay Flexibility," Papers, London School of Economics - Centre for Labour Economics 344, London School of Economics - Centre for Labour Economics.
  3. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 536-43, June.
  4. repec:fth:prinin:187 is not listed on IDEAS
  5. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 92-28, Federal Reserve Bank of Chicago.
  6. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  7. William J. Carrington, 1993. "Wage Losses for Displaced Workers: Is It Really the Firm That Matters?," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 28(3), pages 435-462.
  8. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 319-24, March.
  9. Daniel S. Hamermesh, 1987. "What Do We Know About Worker Displacement in the U.S.?," NBER Working Papers, National Bureau of Economic Research, Inc 2402, National Bureau of Economic Research, Inc.
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Cited by:
  1. Finnie, Ross, 2006. "Mobilite internationale : donnees sur les taux de sortie et de retour des Canadiens, 1982 a 2003," Direction des etudes analytiques : documents de recherche, Statistics Canada, Direction des etudes analytiques 2006288f, Statistics Canada, Direction des etudes analytiques.
  2. David S. Kaplan & Raymond Robertson & Gabriel Martínez González, 2005. "What Happens to Wages after Displacement?," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  3. Julie L. Hotchkiss & M. Melinda Pitts & John C. Robertson, 2004. "Wage gains among job changers across the business cycle:> insight from state administrative data," Working Paper, Federal Reserve Bank of Atlanta 2004-19, Federal Reserve Bank of Atlanta.
  4. Morse, Lawrence B., 2005. "After a shutdown: a case study of a closed textile mill," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 34(3), pages 401-415, May.
  5. Robert F. Schoeni & Michael Dardia, 1997. "Earnings Losses of Displaced Workers in the 1990s," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 8, Northwestern University/University of Chicago Joint Center for Poverty Research.
  6. Finnie, Ross, 2006. "International Mobility: Patterns of Exit and Return of Canadians, 1982 to 2003," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 2006288e, Statistics Canada, Analytical Studies Branch.

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