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Earnings losses and labor mobility over the life-cycle

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  • Jung, Philip
  • Kuhn, Moritz

Abstract

An extensive empirical literature has documented that workers with high tenure suffer large and persistent earnings losses when they get displaced. We study the reasons behind these losses in a tractable search model with a life-cycle dimension, endogenous job mobility, worker- and match-heterogeneity. The model reconciles key characteristics of the U.S. labor market: large average transition rates, a large share of stable jobs, and the earnings losses from displacement. We decompose the earnings losses and find that only 50% result from skill losses. Endogenous reactions and selection account for the remainder. Our findings have important implications for the welfare costs of displacement and labor market policy.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40287.

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Date of creation: 27 Jul 2012
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Handle: RePEc:pra:mprapa:40287

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Keywords: Earnings Losses; Life-Cycle; Labor-Market Transitions; Turbulence;

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References

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Cited by:
  1. Koehne, Sebastian & Kuhn, Moritz, 2012. "Should unemployment insurance be asset-tested?," MPRA Paper 36973, University Library of Munich, Germany.
  2. Petra Marotzke, 2014. "Job Search and the Age-Inequality Profile," Working Paper Series of the Department of Economics, University of Konstanz 2014-06, Department of Economics, University of Konstanz.
  3. Marotzke, Petra, 2013. "Job Search and the Age-Inequality Profile," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80007, Verein für Socialpolitik / German Economic Association.
  4. Philip Jung & Moritz Kuhn, 2013. "Wage dynamics in long-term contracts," 2013 Meeting Papers 556, Society for Economic Dynamics.

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