Returns to migration after job loss– the importance of job match

Loss of specific human capital is often identified as a mechanism for why displaced workers might experience permanent drops in earnings after job loss. Moreover, the existing research has argued that displaced workers who migrate out of their region of origin have lower earnings than those who do not. The purpose of this paper is to extend the discussion on returns to migration by accounting for the type of job people get and how related it is to their skills. Using an endogenous treatment model to control for selection bias in migration and career change, we compare displaced stayers with displaced movers in Sweden. Results show that migrants who get a job that matches their occupation- and industry-specific skills display the highest earnings compared to all displaced workers. If migration is combined with a job mismatch, negative returns to migration are instead observed. Given that job displacement is associated with high costs, understanding how the workers behave in the labor market gives insights on how to minimize the costs of losing a job for the individual, which in its turn creates implications for the society at large.