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Earnings losses and labor mobility over the lifecycle

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  • Philip Jung

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Abstract

Extensive literature demonstrates that workers with high tenure suffer large and persistent earnings losses when they are displaced. We study the reasons behind these losses in a tractable search model that includes a lifecycle dimension, endogenous job mobility, and worker- and match-heterogeneity. The model jointly explains key characteristics of the U.S. labor market such as large average transition rates, a large share of stable jobs, and earnings losses after displacement. We decompose earnings losses and find that only 50% result from wage loss, and endogenous reactions and selection account for the remainder. These findings have important implications for welfare costs of displacement and labor market policies.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 771.

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Date of creation: 2013
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Handle: RePEc:red:sed013:771

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Cited by:
  1. Sebastian Koehne & Moritz Kuhn, 2013. "Should Unemployment Insurance be Asset-Tested," CESifo Working Paper Series 4324, CESifo Group Munich.
  2. 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.
  3. Philip Jung & Moritz Kuhn, 2013. "Wage dynamics in long-term contracts," 2013 Meeting Papers 556, Society for Economic Dynamics.
  4. 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.

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