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The effects of being out of the labor market on subsequent wages: evidence for Uruguay

Author

Listed:
  • Verónica Amarante

    () (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a)

  • Rodrigo Arim

    () (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a)

  • Andrés Dean

    () (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a)

Abstract

Based on administrative data combining workers' earnings histories and unemployment insurance benefits, we document short and long term wage losses for a large sample of Uruguayan formal workers with high tenure. We are able to study how wage losses vary across age groups, gender, industry and size of the firm. We also assess differences between switchers and non switchers, and consider the effect of the economic cycle. Our data allows providing original evidence about the smoothing role of the unemployment insurance program, even in a developing country. Our main findings indicate that workers loose around 48% of their pre-displacement wages in the first quarter after displacement, and after five years, losses are still 3%.

Suggested Citation

  • Verónica Amarante & Rodrigo Arim & Andrés Dean, 2012. "The effects of being out of the labor market on subsequent wages: evidence for Uruguay," Documentos de Trabajo (working papers) 12-10, Instituto de Economia - IECON.
    • Handle: RePEc:ulr:wpaper:dt-10-12
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    References listed on IDEAS

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    1. Kenneth A. Couch & Dana W. Placzek, 2010. "Earnings Losses of Displaced Workers Revisited," American Economic Review, American Economic Association, vol. 100(1), pages 572-589, March.
    2. Anabela Carneiro & Pedro Portugal, 2006. "Earnings Losses of Displaced Workers: Evidence from a Matched Employer-employee Data Set," CEF.UP Working Papers 0607, Universidade do Porto, Faculdade de Economia do Porto.
    3. David S. Kaplan & Raymond Robertson & Gabriel Martínez González, 2005. "What Happens to Wages after Displacement?," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 197-242, January.
    4. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
    5. Marcus Eliason, 2012. "Lost jobs, broken marriages," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(4), pages 1365-1397, October.
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    7. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-543, June.
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    9. Daniel Sullivan & Till von Wachter, 2009. "Job Displacement and Mortality: An Analysis Using Administrative Data," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1265-1306.
    10. Marcus Eliason & Donald Storrie, 2009. "Does Job Loss Shorten Life?," Journal of Human Resources, University of Wisconsin Press, vol. 44(2).
    11. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-324, March.
    12. Couch, Kenneth A. & Jolly, Nicholas A. & Placzek, Dana W., 2011. "Earnings losses of displaced workers and the business cycle: An analysis with administrative data," Economics Letters, Elsevier, vol. 111(1), pages 16-19, April.
    13. Appelqvist, Jukka, 2007. "Wage and Earnings Losses of Displaced Workers in Finland," Discussion Papers 422, VATT Institute for Economic Research.
    14. Marcus Eliason, 2011. "Income after job loss: the role of the family and the welfare state," Applied Economics, Taylor & Francis Journals, vol. 43(5), pages 603-618.
    15. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
    16. Alexander Hijzen & Richard Upward & Peter W. Wright, 2010. "The Income Losses of Displaced Workers," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
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    Citations

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    Cited by:

    1. Kaldewei, Cornelia & Weller, Jürgen, 2013. "Empleo, crecimiento sostenible e igualdad," Macroeconomía del Desarrollo 145, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Luis Beccaria & Roxana Maurizio & Martin Trombetta & Gustavo Vázquez, 2016. "Una evaluación del efecto scarring en Argentina," Revista Desarrollo y Sociedad, Universidad de los Andes - CEDE, vol. 77, August.
    3. -, 2014. "Economic Survey of Latin America and the Caribbean 2014: Challenges to sustainable growth in a new external context," Estudio Económico de América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37033 edited by Eclac.
    4. -, 2014. "Estudio Económico de América Latina y el Caribe 2014: desafíos para la sostenibilidad del crecimiento en un nuevo contexto externo," Estudio Económico de América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 36970 edited by Cepal.
    5. -, 2014. "Inestabilidad y desigualdad: La vulnerabilidad del crecimiento en América Latina y el Caribe," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 128 edited by Cepal, December.
    6. Verónica Amarante & Andrés Dean, 2012. "Dinámica del mercado laboral uruguayo," Documentos de Trabajo (working papers) 12-17, Instituto de Economia - IECON.
    7. Verónica Alaimo & Mariano Bosch & David S. Kaplan & Carmen Pagés & Laura Ripani, 2015. "Jobs for Growth," IDB Publications (Books), Inter-American Development Bank, number 90977, February.
    8. Andrés Dean & Estefaní­a Galván & Ivone Perazzo, 2014. "¿Acceden al subsidio por desempleo los asalariados rurales en Uruguay? Análisis de la situación actual y simulación de esquemas alternativos," Documentos de Trabajo (working papers) 14-22, Instituto de Economia - IECON.
    9. Mariano Bosch, 2016. "Does unemployment insurance offer incentives to take jobs in the formal sector?," IZA World of Labor, Institute of Labor Economics (IZA), pages 300-300, October.

    More about this item

    Keywords

    Wage losses; Displacement;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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