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A Distributional Analysis of Displacement Costs in an Economic Depression and Recovery

  • Ossi Korkeamäki
  • Tomi Kyyrä

We study the earnings losses of Finnish private sector workers who lost their jobs at two very different points in the business cycle. The first group was displaced in 1992 (depression period) and the second one in 1997 (recovery period). The focal point of the analysis is the quantile displacement effect, the change in the earnings distribution due to involuntary job separation. We use mass layoffs and plant closures to identify groups of workers who were displaced from exogenous causes. The effect of displacement is strongest at the lower end of the earnings distribution, and small or negligible at the upper end. Women and those displaced during the depression period are subject to larger earnings losses.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 465.

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Date of creation: 31 Dec 2008
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Handle: RePEc:fer:dpaper:465
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  1. Joshua D. Angrist, 2000. "Estimation of Limited-Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," NBER Technical Working Papers 0248, National Bureau of Economic Research, Inc.
  2. Dean Jolliffe & Bohdan Krushelnytskyy & Anastassia Semykina, 2001. "Censored least absolute deviations estimator: CLAD," Stata Technical Bulletin, StataCorp LP, vol. 10(58).
  3. Huttunen, Kristiina & Moen, Jarle & Salvanes, Kjell G., 2006. "How Destructive Is Creative Destruction? The Costs of Worker Displacement," IZA Discussion Papers 2316, Institute for the Study of Labor (IZA).
  4. Mullahy, John, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Comment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 23-25, January.
  5. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  6. Anabela Carneiro & Pedro Portugal, 2006. "Earnings Losses of Displaced Workers: Evidence from a Matched Employer-Employee Data Set," Working Papers w200614, Banco de Portugal, Economics and Research Department.
  7. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
  8. Jukka Appelqvist, 2007. "Wage and Earnings Losses of Displaced Workers in Finland," Discussion Papers 422, Government Institute for Economic Research Finland (VATT).
  9. 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.
  10. David Margolis, 1999. "Part-Year Employment, Slow Reemployment and Earnings Losses : The Case of Worker Displacement in France," Working Papers 99-04, Centre de Recherche en Economie et Statistique.
  11. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  12. Todd, Petra, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Comment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 25-27, January.
  13. Moffitt, Robert A, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Comment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 20-23, January.
  14. Margolis, D.N., 2000. "Worker Displacement in France," Papiers d'Economie Mathématique et Applications 2000.03, Université Panthéon-Sorbonne (Paris 1).
  15. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
  16. Kyyrä, Tomi & Ollikainen, Virve, 2008. "To search or not to search? The effects of UI benefit extension for the older unemployed," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2048-2070, October.
  17. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 27-28, January.
  18. Honkapohja, Seppo & Koskela, Erkki, 2002. "The Economic Crisis of the 1990s in Finland," Discussion Papers 683, The Research Institute of the Finnish Economy.
  19. Kenneth A. Couch, 2001. "Earnings losses and unemployment of displaced workers in Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(3), pages 559-572, April.
  20. Burda, Michael C. & Mertens, Antje, 1999. "Estimating wage losses of displaced workers in Germany," SFB 373 Discussion Papers 1999,35, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  21. Marcus Eliason & Donald Storrie, 2006. "Lasting or Latent Scars? Swedish Evidence on the Long-Term Effects of Job Displacement," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 831-856, October.
  22. repec:fth:inseep:9904 is not listed on IDEAS
  23. Imbens, Guido W, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Comment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 17-20, January.
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