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Heterogeneity among Displaced Workers

Author

Listed:
  • Pfann, Gerard A

    (I.Z.A. Bonn)

  • Ben Kriechel

Abstract

We combine post-displacement survey data with information from a displacing firm's personnel files in order to reveal sources of worker heterogeneity in search time and wage losses. First, we detail how experience-related characteristics affect workers' labour market careers during a period of three years after the bankruptcy of the firm. We find that wage losses are large. Interestingly, firm, rank, or job tenure do not explain observed wage differences. Idiosyncratic ability, job rotations prior to displacement, and differences in pre- and post-displacement job characteristics contribute most to observed variations in wages. The individual post-displacement labor market histories allow for testing the Blanchard-Diamond (1994) ranking model for which we find no support. We then develop a dynamic reservation wage updating model. The method of updating is based on the simple idea that job seekers are informed about successful matches of their former colleagues (Rees, 1966; Granovetter, 1974). The model fits the data well.

Suggested Citation

  • Pfann, Gerard A & Ben Kriechel, 2003. "Heterogeneity among Displaced Workers," Royal Economic Society Annual Conference 2003 164, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:164
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    Citations

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    Cited by:

    1. Inés P. Murillo, 2011. "Human capital obsolescence: some evidence for Spain," International Journal of Manpower, Emerald Group Publishing, vol. 32(4), pages 426-445, July.
    2. David S. Kaplan & Raymond Robertson & Gabriel Martínez González, 2005. "What Happens to Wages after Displacement?," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Spring 20), pages 197-242, January.
    3. Ben Kriechel & Gerard Pfann, 2005. "The role of specific and general human capital after displacement," Education Economics, Taylor & Francis Journals, vol. 13(2), pages 223-236.
    4. Machikita, Tomohiro, 2006. "Career Crisis? Impacts of Financial Shock on the Entry-Level Labor Market: Evidence from Thailand," IDE Discussion Papers 83, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Grip Andries de, 2006. "Evaluating Human Capital Obsolescence," ROA Working Paper 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    6. Tom Broekel & Ron Boschma, 2012. "Knowledge networks in the Dutch aviation industry: the proximity paradox," Journal of Economic Geography, Oxford University Press, vol. 12(2), pages 409-433, March.

    More about this item

    Keywords

    idiosyncratic ability; mass lay-off; social networks; unemployment;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods

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