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Worker displacement during the transition : experience from Slovenia

  • Orazem, Peter
  • Vodopivec, Milan
  • Wu, Ruth

Unusually rich administrative data sets covering both firms and workers enabled the authors to study displacement in Slovenia during 1987-93. They describe displacement trends and the characteristics of displaced workers comparing them to those in North America during a major recession. They analyze the determinants of displacement in the framework of labor turnover, and explore factors associated with postdisplacement wage losses. Their findings were as follows. One, a comparison of displacement in Slovenia in 1990-93 and in North America during the recession of the early 1980s shows striking similarities in the incidence of displacement by gender and industry, as well as reemployment paths. Two, workers try to avoid displacement both by switching to another job and by leaving the labor force. Before becoming displaced, they also take wage cuts. Three, both the probability of displacement and the probability of job quits are negatively correlated with tenure. Fourth, women are no more likely to be displaced than men, and face smaller postdisplacement wage losses. Non-Slovenians are no more likely to be displaced than Slovenians, and face equal wage losses. Five, firm characteristics matter. The smaller and less profitable the firm, the greater the likelihood of both displacement and job-switching. Restructuring subsidies that lower firm layoff costs increase the number of firm- and worker-initiated transitions. Six, about half the displaced workers who find new jobs change occupations and about a third change industry. Seven, only about a third of workers displaced in 1990 had found a job by the end of 1991. Surprisingly, for more than 68 percent of them, wage growth exceeded the median wage growth in the economy (17 percent). Those not reemployed seem to be paying a heavy toll: not only do they stay unemployed much longer, but they face much lower reemployment wages. Eight, as studies of displacement in the United States also show, greater job experience is associated with heavier postdiplacement wage losses. The magnitude of those losses is consistent with findings about U.S. wage losses.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1449.

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Date of creation: 30 Apr 1995
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Handle: RePEc:wbk:wbrwps:1449
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  1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  2. J. David Brown & John S. Earle & Almos Telegdy, 2004. "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia and Ukraine," IEHAS Discussion Papers 0425, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers 1460, C.E.P.R. Discussion Papers.
  4. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier.
  5. Boris Pleskovic & Jeffrey D. Sachs, 1994. "Political Independence and Economic Reform in Slovenia," NBER Chapters, in: The Transition in Eastern Europe, Volume 1, pages 191-220 National Bureau of Economic Research, Inc.
  6. Orazem, Peter F & Vodopivec, Milan, 1995. "Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia," World Bank Economic Review, World Bank Group, vol. 9(2), pages 201-30, May.
  7. Lori G. Kletzer & Robert W. Fairlie, 2003. "The Long-Term Costs of Job Displacement for Young Adult Workers," ILR Review, Cornell University, ILR School, vol. 56(4), pages 682-698, July.
  8. Robin L. Lumsdaine & Olivia S. Mitchell, . "New Developments in the Economic Analysis of Retirement," Pension Research Council Working Papers 98-8, Wharton School Pension Research Council, University of Pennsylvania.
  9. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
  10. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  11. Michael Podgursky & Paul Swaim, 1987. "Job displacement and earnings loss: Evidence from the Displaced Worker Survey," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 41(1), pages 17-29, October.
  12. Daniel S. Hamermesh, 1984. "The Costs of Worker Displacement," NBER Working Papers 1495, National Bureau of Economic Research, Inc.
  13. Chan, Sewin & Stevens, Ann Huff, 2001. "Job Loss and Employment Patterns of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 484-521, April.
  14. Stevens, Ann Huff, 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 165-88, January.
  15. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  16. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  17. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  18. Milan Vodopivec, 1994. "Appropriability of Returns in the Yugoslav Firm," Eastern Economic Journal, Eastern Economic Association, vol. 20(3), pages 337-348, Summer.
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