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Choosing a Control Group for Displaced Workers

Author

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  • Pawel Krolikowski

Abstract

The vast majority of studies on the earnings of displaced workers use a control group of never-displaced workers to examine the effects of initial displacement. This approach attributes earnings declines associated with all future job instability to the initial displacement event, overstating the losses relative to the average treatment effect. In this article, the author’s approach isolates the impact of an average displacement without conditioning on future displacement status in the control group. In comparisons of the standard and alternative approaches using Panel Study of Income Dynamics (PSID) data, the estimated long-run earnings losses fall dramatically from 25% to as low as 5%.

Suggested Citation

  • Pawel Krolikowski, 2018. "Choosing a Control Group for Displaced Workers," ILR Review, Cornell University, ILR School, vol. 71(5), pages 1232-1254, October.
    • Handle: RePEc:sae:ilrrev:v:71:y:2018:i:5:p:1232-1254
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    Cited by:

    1. Patrick Coate & Pawel Krolikowski & Mike Zabek, 2018. "Parental Assistance after Job Loss," Economic Commentary, Federal Reserve Bank of Cleveland, issue August.
    2. Minaya, Veronica & Moore, Brendan & Scott-Clayton, Judith, 2023. "The effect of job displacement on public college enrollment: Evidence from Ohio," Economics of Education Review, Elsevier, vol. 92(C).
    3. Blien, Uwe & Dauth, Wolfgang & Roth, Duncan H.W., 2021. "Occupational routine intensity and the costs of job loss: evidence from mass layoffs," Labour Economics, Elsevier, vol. 68(C).
    4. Aaron Flaaen & Matthew D. Shapiro & Isaac Sorkin, 2019. "Reconsidering the Consequences of Worker Displacements: Firm versus Worker Perspective," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(2), pages 193-227, April.
    5. Krolikowski, Pawel & Zabek, Mike & Coate, Patrick, 2020. "Parental proximity and earnings after job displacements," Labour Economics, Elsevier, vol. 65(C).
    6. Meekes, Jordy & Hassink, Wolter H.J., 2022. "Gender differences in job flexibility: Commutes and working hours after job loss," Journal of Urban Economics, Elsevier, vol. 129(C).
    7. Ivandić, Ria & Lassen, Anne Sophie, 2023. "Gender gaps from labor market shocks," Labour Economics, Elsevier, vol. 83(C).
    8. Guo, Angela & Krolikowski, Pawel & Yang, Meifeng, 2023. "Displaced workers and the pandemic recession," Economics Letters, Elsevier, vol. 226(C).
    9. Meekes, Jordy & Hassink, Wolter H.J., 2019. "The role of the housing market in workers′ resilience to job displacement after firm bankruptcy," Journal of Urban Economics, Elsevier, vol. 109(C), pages 41-65.

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    More about this item

    Keywords

    displaced workers; earnings; control group; simulations; job loss;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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