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Wage Insurance for Displaced Workers

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  • Benjamin G. Hyman
  • Brian K. Kovak
  • Adam Leive

Abstract

Wage insurance provides income support to displaced workers who find reemployment at a lower wage. We analyze wage insurance in the context of the U.S. Trade Adjustment Assistance (TAA) program by merging linked employer-employee Census data to TAA petitions and leveraging a discontinuity in eligibility based on worker age. Wage insurance eligibility increases short-run employment probabilities and leads to higher long-run cumulative earnings. We find shorter non-employment durations largely drive increased long-term earnings among workers eligible for wage insurance. Our results are quantitatively consistent with a standard non-stationary partial equilibrium search model. The program is self-financing even under conservative assumptions.

Suggested Citation

  • Benjamin G. Hyman & Brian K. Kovak & Adam Leive, 2024. "Wage Insurance for Displaced Workers," NBER Working Papers 32464, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32464
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    Cited by:

    1. Colmer, Jonathan & Krause, Eleanor & Lyubich, Eva & Voorheis, John, 2024. "Transitional costs and the decline in coal: worker-level evidence," LSE Research Online Documents on Economics 126795, London School of Economics and Political Science, LSE Library.
    2. David Autor & David Dorn & Gordon Hanson & Maggie R. Jones & Bradley Setzler, 2024. "Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization," Working Papers 24-78, Center for Economic Studies, U.S. Census Bureau.
    3. Holzer, Harry J., 2025. "Workforce Development in the US: Recent Trends and Evidence," IZA Discussion Papers 18061, Institute of Labor Economics (IZA).
    4. Tucker Smith, 2024. "Do Human Capital Adjustments Protect Youths from Structural Change?," Working Papers 2411, Federal Reserve Bank of Dallas.

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    More about this item

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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