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Earnings Losses and Labor Mobility over the Lifecycle

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  • Jung, Philip

    (TU Dortmund)

  • Kuhn, Moritz

    (University of Bonn)

Abstract

Extensive literature demonstrates that workers with high tenure suffer large and persistent earnings losses when they are displaced. We study the reasons behind these losses in a tractable search model that includes a lifecycle dimension, endogenous job mobility, and worker- and match-heterogeneity. The model jointly explains key characteristics of the U.S. labor market such as large average transition rates, a large share of stable jobs, and earnings losses after displacement. We decompose earnings losses and find that only 50% result from wage loss, and endogenous reactions and selection account for the remainder. These findings have important implications for welfare costs of displacement and labor market policies.

Suggested Citation

  • Jung, Philip & Kuhn, Moritz, 2012. "Earnings Losses and Labor Mobility over the Lifecycle," IZA Discussion Papers 6835, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp6835
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    More about this item

    Keywords

    earnings losses; lifecycle; labor-market transitions; turbulence;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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