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The Uncertainty of Displacement

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  • Storer, Paul
  • Van Audenrode, Marc

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Abstract

In this paper, we document the importance of individual variations in wage outcomes of displacement, as opposed to the change in the wage distribution itself. Most of the research on displaced workers has focused on analyzing changes in the wage distribution. We show that, while the changes in the distribution of wages before and after displacement are real, as shown in many previous studies, they are negligible compared to the enormous game of musical chair taking place between workers within these distributions. When studying displaced workers, we show that, from an individual worker's point of view, the change in the distribution of wages matters much less than the draw they will make within these distributions. We show that workers suffer large movements within the distribution of wages before and after displacement. Finally, we show that even with reasonable levels of risk aversion, these large movements inside the wage distribution translate into important losses of utility for the workers.

Suggested Citation

  • Storer, Paul & Van Audenrode, Marc, 1998. "The Uncertainty of Displacement," Cahiers de recherche 9823, Université Laval - Département d'économique.
  • Handle: RePEc:lvl:laeccr:9823
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    File URL: http://www.ecn.ulaval.ca/w3/recherche/cahiers/1998/9823.pdf
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    Cited by:

    1. Jaap H. Abbring & Gerard J. van den Berg & Pieter A. Gautier & A. Gijsbert C. van Lomwel & Jan C. van Ours & Christopher J. Ruhm, 1998. "Displaced Workers in the United States and the Netherlands," Tinbergen Institute Discussion Papers 98-084/3, Tinbergen Institute.

    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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