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Earnings losses and labor mobility over the lifecycle

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  • Philip Jung

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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.

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  • Philip Jung, 2013. "Earnings losses and labor mobility over the lifecycle," 2013 Meeting Papers 771, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:771
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    References listed on IDEAS

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    Cited by:

    1. Mecikovsky, Ariel Matias & Meier, Matthias, 2014. "Do plants freeze upon uncertainty shocks?," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100541, Verein für Socialpolitik / German Economic Association.
    2. Claudio Michelacci & Hernán Ruffo, 2015. "Optimal Life Cycle Unemployment Insurance," American Economic Review, American Economic Association, vol. 105(2), pages 816-859, February.
    3. Sebastian Koehne & Moritz Kuhn, 2015. "Should unemployment insurance be asset-tested?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 575-592, July.
    4. repec:red:issued:16-276 is not listed on IDEAS
    5. Pessoa de Araujo, Ana Luisa, 2017. "Wage Inequality and Job Stability," Working Papers 5, Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute.
    6. repec:red:ecodyn:v:18:y:2017:i:1:agenda is not listed on IDEAS
    7. Joachim Hubmer, 2018. "The Job Ladder and its Implications for Earnings Risk," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 172-194, July.
    8. Krolikowski, Pawel, 2016. "Choosing a Control Group for Displaced Workers," Working Paper 1605, Federal Reserve Bank of Cleveland, revised 17 Aug 2017.
    9. Fackler, Daniel & Müller, Steffen & Stegmaier, Jens, 2017. "Explaining wage losses after job displacement: Employer size and lost firm rents," IWH Discussion Papers 32/2017, Halle Institute for Economic Research (IWH).
    10. Marotzke, Petra, 2013. "Job Search and the Age-Inequality Profile," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80007, Verein für Socialpolitik / German Economic Association.
    11. Sanchez, Manuel & Wellschmied, Felix, 2017. "Modeling Life-Cycle Earnings Risk with Positive and Negative Shocks," IZA Discussion Papers 10925, Institute for the Study of Labor (IZA).
    12. Daniel Borowczyk-Martins & Etienne Lalé, 2015. "How Bad is Involuntary Part-time Work?," Bristol Economics Discussion Papers 15/664, Department of Economics, University of Bristol, UK, revised 13 Jan 2016.
    13. Pawel Krolikowski, 2017. "Job Ladders and Earnings of Displaced Workers," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(2), pages 1-31, April.
    14. Burdett, Ken & Carrillo-Tudela, Carlos & Coles, Melvyn G., 2015. "The Cost of Job Loss," ISER Working Paper Series 2015-12, Institute for Social and Economic Research.
    15. Philip Jung & Moritz Kuhn, 2013. "Wage dynamics in long-term contracts," 2013 Meeting Papers 556, Society for Economic Dynamics.

    More about this item

    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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