Life Cycle Effects of Job Displacement in Brazil
This paper estimates the consequences of the decline of the Brazilian manufacturing sector for displaced workers. I estimate that earnings decline by nearly 50% after displacement relative to one year prior. About a quarter of the initial earnings loss is attributable to reduced hours of work rather than lower wages. However, hours recover fully within one year of displacement, while wages remain about a third lower. Allowing the displacement effect to differ by age yields a surprising U-shaped curve. Middle aged workers are hit hardest by a layoff, with younger and older workers relatively better off. For workers aged 35-40, the initial earnings loss reaches 70%. This is a surprising finding because most theories of job loss predict a negative relationship between the wage loss on displacement and the length of tenure on the pre-displacement job, which is increasing in age. I account for these facts with a simple model in which the ratio of specific to general human capital reaches a peak at middle age. Young workers have little specific capital and a low specific-general human capital ratio. In the early years of one’s career, specific capital (whether due to investments in specific skills or in search) accumulates much more rapidly than general human capital. Around ages 35 to 40, this trend reverses and the returns to general skills rise more rapidly. Thus, the accumulation of general skills serves to reduce the effect of job displacement at older ages despite increasing average job tenure. These findings suggest that major market reforms may have larger than anticipated effects because the primary losers are workers in the middle of their working life. This is also important from a welfare perspective because these workers are the most likely to fall through the cracks of social safety nets, which typically target younger and older workers.
|Date of creation:||Sep 2006|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-543, June.
- Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
- Card, David & Sullivan, Daniel G, 1988.
"Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment,"
Econometric Society, vol. 56(3), pages 497-530, May.
- David Card & Daniel Sullivan, 1987. "Measuring the Effect of Subsidized Training Programs on Movements In andOut of Employment," NBER Working Papers 2173, National Bureau of Economic Research, Inc.
- Katherine Terrell & Vit Sorm, 1998.
"Labor Market Policies and Unemployment in the Czech Republic,"
William Davidson Institute Working Papers Series
216, William Davidson Institute at the University of Michigan.
- Terrell, Katherine & Sorm, Vit, 1999. "Labor Market Policies and Unemployment in the Czech Republic," Journal of Comparative Economics, Elsevier, vol. 27(1), pages 33-60, March.
- Gustavo Gonzaga, 2003.
"Labor Turnover and Labor Legislation in Brazil,"
Textos para discussão
475, Department of Economics PUC-Rio (Brazil).
- Gustavo Gonzaga, 2003. "Labor Turnover and Labor Legislation in Brazil," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2003), pages 165-222, August.
- Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992.
"Earnings Losses of Displaced Workers,"
Upjohn Working Papers and Journal Articles
92-11, W.E. Upjohn Institute for Employment Research.
- Bellmann Lutz & Estrin Saul & Lehmann Hartmut & Wadsworth Jonathan, 1995.
"The Eastern German Labor Market in Transition: Gross Flow Estimates from Panel Data,"
Journal of Comparative Economics,
Elsevier, vol. 20(2), pages 139-170, April.
- L Bellmann & S Estrin & H Lehmann & Jonathan Wadsworth, 1992. "The Eastern German Labour Market in Transition: Gross Flow Estimates from Panel Data," CEP Discussion Papers dp0102, Centre for Economic Performance, LSE.
- Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
- William Easterly, 2003.
"National Policies and Economic Growth: A Reappraisal,"
27, Center for Global Development.
- Easterly, William, 2005. "National Policies and Economic Growth: A Reappraisal," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 15, pages 1015-1059 Elsevier.
- repec:fth:prinin:303 is not listed on IDEAS
- Orley Ashenfelter & David E. Card, 1984.
"Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs,"
554, Princeton University, Department of Economics, Industrial Relations Section..
- Ashenfelter, Orley & Card, David, 1985. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 648-660, November.
- Orley Ashenfelter & David Card, 1984. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," NBER Working Papers 1489, National Bureau of Economic Research, Inc.
- Ham, John C & Svejnar, Jan & Terrell, Katherine, 1998.
"Unemployment and the Social Safety Net during Transitions to a Market Economy: Evidence from the Czech and Slovak Republics,"
American Economic Review,
American Economic Association, vol. 88(5), pages 1117-1142, December.
- John Ham & Jan Svejnar & Katherine Terrell, 1998. "Unemployment and the Social Safety Net During Transitions to a Market Economy: Evidence from the Czech and Slovak Republic," William Davidson Institute Working Papers Series 169, William Davidson Institute at the University of Michigan.
- 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 165-188, January.
- Sara De La Rica, 1992. "Displaced Workers in Mass Layoffs: Pre-Displacement Earnings Losses and the Unions Effect," Working Papers 303, Princeton University, Department of Economics, Industrial Relations Section..
- Michael Podgursky & Paul Swaim, 1987. "Job Displacement and Earnings Loss: Evidence from the Displaced Worker Survey," ILR Review, Cornell University, ILR School, vol. 41(1), pages 17-29, October.
- Naercio Menezes-Filho, 2004. "The Costs of Displacement in Brazil," Econometric Society 2004 Latin American Meetings 200, Econometric Society.
- Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier.
- Topel, Robert, 1990. "Specific capital and unemployment: Measuring the costs and consequences of job loss," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 33(1), pages 181-214, January.
- Jovanovic, Boyan, 1979.
"Job Matching and the Theory of Turnover,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 972-990, October.
- Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
- Farber, Henry S, 1994. "The Analysis of Interfirm Worker Mobility," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 554-593, October.
- Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-324, March.
- Klenow, Peter J. & Rodriguez-Clare, Andres, 1997. "Economic growth: A review essay," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 597-617, December.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2291. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.