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Worker displacement during the transition : experience from Slovenia

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  • Orazem, Peter
  • Vodopivec, Milan
  • Wu, Ruth

Abstract

Unusually rich administrative data sets covering both firms and workers enabled the authors to study displacement in Slovenia during 1987-93. They describe displacement trends and the characteristics of displaced workers comparing them to those in North America during a major recession. They analyze the determinants of displacement in the framework of labor turnover, and explore factors associated with postdisplacement wage losses. Their findings were as follows. One, a comparison of displacement in Slovenia in 1990-93 and in North America during the recession of the early 1980s shows striking similarities in the incidence of displacement by gender and industry, as well as reemployment paths. Two, workers try to avoid displacement both by switching to another job and by leaving the labor force. Before becoming displaced, they also take wage cuts. Three, both the probability of displacement and the probability of job quits are negatively correlated with tenure. Fourth, women are no more likely to be displaced than men, and face smaller postdisplacement wage losses. Non-Slovenians are no more likely to be displaced than Slovenians, and face equal wage losses. Five, firm characteristics matter. The smaller and less profitable the firm, the greater the likelihood of both displacement and job-switching. Restructuring subsidies that lower firm layoff costs increase the number of firm- and worker-initiated transitions. Six, about half the displaced workers who find new jobs change occupations and about a third change industry. Seven, only about a third of workers displaced in 1990 had found a job by the end of 1991. Surprisingly, for more than 68 percent of them, wage growth exceeded the median wage growth in the economy (17 percent). Those not reemployed seem to be paying a heavy toll: not only do they stay unemployed much longer, but they face much lower reemployment wages. Eight, as studies of displacement in the United States also show, greater job experience is associated with heavier postdiplacement wage losses. The magnitude of those losses is consistent with findings about U.S. wage losses.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1449.

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Date of creation: 30 Apr 1995
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Handle: RePEc:wbk:wbrwps:1449

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Keywords: Public Health Promotion; Labor Policies; Health Monitoring&Evaluation; Environmental Economics&Policies; Labor Markets; Health Monitoring&Evaluation; Environmental Economics&Policies; Labor Markets; Banks&Banking Reform; Work&Working Conditions;

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References

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  1. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  2. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
  3. Orazem, Peter F & Vodopivec, Milan, 1995. "Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia," World Bank Economic Review, World Bank Group, vol. 9(2), pages 201-30, May.
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  8. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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  12. 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.
  13. Boris Pleskovic & Jeffrey D. Sachs, 1994. "Political Independence and Economic Reform in Slovenia," NBER Chapters, in: The Transition in Eastern Europe, Volume 1, pages 191-220 National Bureau of Economic Research, Inc.
  14. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 51-75, February.
  15. Lori G. Kletzer & Robert W. Fairlie, 2003. "The long-term costs of job displacement for young adult workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(4), pages 682-698, July.
  16. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
  17. Milan Vodopivec, 1994. "Appropriability of Returns in the Yugoslav Firm," Eastern Economic Journal, Eastern Economic Association, vol. 20(3), pages 337-348, Summer.
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Citations

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Cited by:
  1. Jukka Appelqvist, 2007. "Wage and Earnings Losses of Displaced Workers in Finland," Discussion Papers 422, Government Institute for Economic Research Finland (VATT).
  2. Kollo'', Janos & Nagy, Gyula, 1996. "Earnings gains and losses from insured unemployment in Hungary," Labour Economics, Elsevier, vol. 3(3), pages 279-298, October.
  3. Vodopivec, Milan & Dolenc, Primoz, 2008. "Live longer, work longer : making it happen in the labor market," Social Protection Discussion Papers 42471, The World Bank.
  4. Ge, Yuhao & Lehmann, Hartmut, 2013. "The Costs of Worker Displacement in Urban Labor Markets of China," IZA Discussion Papers 7327, Institute for the Study of Labor (IZA).
  5. Hartmut Lehmann & Norberto Pignatti & Jonathan Wadsworth, 2005. "The Incidence and Cost of Job Loss in the Ukrainian Labor Market," CERT Discussion Papers 0504, Centre for Economic Reform and Transformation, Heriot Watt University.
  6. Matusz, Steven J. & Tarr, David, 1999. "Adjusting to trade policy reform," Policy Research Working Paper Series 2142, The World Bank.
  7. Lehmann, Hartmut & Muravyev, Alexander & Razzolini, Tiziano & Zaiceva, Anzelika, 2013. "The wage and non-wage costs of displacement in boom times: Evidence from Russia," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1184-1201.
  8. Darja Borsic & Alenka Kavkler, 2009. "Duration of Regional Unemployment Spells in Slovenia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 7(2), pages 123-146.
  9. Orazem, Peter F. & Vodopivec, Milan, 1997. "Value of human capital in transition to market: Evidence from Slovenia," European Economic Review, Elsevier, vol. 41(3-5), pages 893-903, April.
  10. Darja Boršič & Alenka Kavkler, 2009. "Modeling Unemployment Duration in Slovenia using Cox Regression Models," Transition Studies Review, Springer, vol. 16(1), pages 145-156, May.
  11. H. Lehmann & A. Muravyev & T. Razzolini & A. Zaiceva, 2011. "The Wage and Non-wage Costs of Displacement: Evidence from Russia," Working Papers wp734, Dipartimento Scienze Economiche, Universita' di Bologna.
  12. Rama,Martin G., 1997. "Efficient public sector downsizing," Policy Research Working Paper Series 1840, The World Bank.
  13. Lehmann, Hartmut & Muravyev, Alexander & Razzolini, Tiziano & Zaiceva, Anzelika, 2010. "The Costs of Job Loss in Russia," IZA Discussion Papers 5415, Institute for the Study of Labor (IZA).

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