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In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers

  • Wachter, Till von


    (University of California, Los Angeles)

  • Bender, Stefan

    (Institute for Employment Research (IAB), Nuremberg)

We exploit administrative data on young German workers and their employers to study the long-term effects of an early job loss. To account for non-random sorting of workers into firms with different turnover rates and for selective job mobility, we use changes over time in firm- and age-specific labor demand as an instrument for displacement. We find that wage losses of young job losers are initially 15% but fade to zero within five years. Only workers leaving very large establishments suffer persistent losses. A comparison of estimators implies that initial sorting, negative selection, and voluntary job mobility may have biased previous U.S. studies finding permanent effects of early displacements.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1348.

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Length: 59 pages
Date of creation: Oct 2004
Date of revision:
Publication status: published in: American Economic Review, 2006, 96 (5), 1679-1705
Handle: RePEc:iza:izadps:dp1348
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