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Job displacement and labor market outcomes by skill level

  • David Seim

    ()

This paper investigates the effects of displacement on outcomes such as annual earnings, unemployment, wages and hours worked. It relies on previously unexplored administrative data on all displaced workers in Sweden in 2002, 2003 and 2004 which are linked to employer-employee matched data at the individual level. By linking the data to military enlistment records, the paper assesses the selection into displacement and finds that workers with low cognitive and noncognitive skills are significantly more likely to be displaced than high-skilled workers. The analysis of displacement effects shows evidence of large and long-lasting welfare costs from displacement. Moreover, studying the heterogenous impacts of job displacement in terms of cognitive and noncognitive skills reveals that although workers with high skills fare better than low-skilled workers in absolute terms, there are no significant differences in the recovery rates between skill groups. Finally, by using administrative data on displacements, it is possible to assess quantitatively the bias that results from not being able to separate quits from layoffs in earlier studies

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Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number wp2012-4.

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Date of creation: 03 Dec 2012
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Handle: RePEc:eea:boewps:wp2012-4
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  1. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  2. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
  3. Erik Lindqvist & Roine Vestman, 2011. "The Labor Market Returns to Cognitive and Noncognitive Ability: Evidence from the Swedish Enlistment," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 101-28, January.
  4. Eliason, Marcus & Storrie, Donald, 2009. "Job loss is bad for your health - Swedish evidence on cause-specific hospitalization following involuntary job loss," Social Science & Medicine, Elsevier, vol. 68(8), pages 1396-1406, April.
  5. Cawley, John & Heckman, James & Vytlacil, Edward, 2001. "Three observations on wages and measured cognitive ability," Labour Economics, Elsevier, vol. 8(4), pages 419-442, September.
  6. 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.
  7. Kenneth A. Couch & Dana W. Placzek, 2010. "Earnings Losses of Displaced Workers Revisited," American Economic Review, American Economic Association, vol. 100(1), pages 572-89, March.
  8. 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.
  9. Daniel Sullivan & Till von Wachter, 2009. "Job Displacement and Mortality: An Analysis Using Administrative Data," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 1265-1306, August.
  10. Henry Farber, 2003. "Job Loss in the United States, 1981-2001," NBER Working Papers 9707, National Bureau of Economic Research, Inc.
  11. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 411-482, July.
  12. Derek Neal, 1998. "The Link between Ability and Specialization: An Explanation for Observed Correlations between Wages and Mobility Rates," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 173-200.
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