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Decomposing the wage losses of displaced workers: the role of the reallocation of workers into firms and job titles

Author

Listed:
  • Pedro Portugal
  • Pedro S. Raposo
  • Anabela Carneiro

Abstract

Using an unusually rich matched employer-employee-job title data set for Portugal, this paper evaluates the sources of wage losses of workers displaced due to firm closure based on the comparison of workers’ wages differentials before and after displacement. Potential wage losses of displaced workers can be related to firm, job title, and match heterogeneity in the pre- and post-displacement jobs. In this vein, we estimate a threeway high-dimensional fixed effects regression model that enables us to decompose the sources of the wage losses into the contribution of firm, job title, and match fixed effects. The worker-firm match plays a very sizable role. We found that the allocation of workers into poorer matches accounts for 38 percent of the total average wage loss. Sorting among firms accounts for 36 percent. Job downgrading also plays a significant role in explaining the wage loss of displaced workers, accounting for the remaining 26 percent.

Suggested Citation

  • Pedro Portugal & Pedro S. Raposo & Anabela Carneiro, 2015. "Decomposing the wage losses of displaced workers: the role of the reallocation of workers into firms and job titles," Working Papers w201511, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w201511
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    References listed on IDEAS

    as
    1. Carneiro, Anabela & Portugal, Pedro & Varejão, José, 2014. "Catastrophic job Destruction during the Portuguese Economic Crisis," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 444-457.
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    1. Decomposing the wage losses of displaced workers: the role of the reallocation of workers into firms and job titles
      by maximorossi in NEP-LTV blog on 2015-11-06 23:02:42

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    Cited by:

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    5. Wiljan van den Berge, 2019. "Automatic Reaction – What Happens to Workers at Firms that Automate?," CPB Discussion Paper 390, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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