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Labor Market Dynamics and Wage Losses of Displaced Workers in France and the United States

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  • Arnaud Lefranc

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Abstract

The objective of this paper is to provide a comparative assessment of the consequences of worker displacement in France and the United States. I estimate wage losses of displaced workers in the two countries and examine the relative contribution of two important sources of post-displacement wage adjustments. The first one relates to the loss of seniority-accumulated firmspecific earnings potential. The second one arises from match heterogeneity. Identification of the relative contribution of these two sources can be achieved given separate estimates of returns to seniority. I show that, while the order of magnitude of total wage losses are comparable in the two economies (10 to 15%), the sources of wage adjustments differ strongly: all of the wage decline in France seems to be due to the loss of accumulated firm-specific earnings potential, while in the US, more than half of measured wage losses arise from a downgrading of displaced workers into lower quality job matches.

Suggested Citation

  • Arnaud Lefranc, 2003. "Labor Market Dynamics and Wage Losses of Displaced Workers in France and the United States," William Davidson Institute Working Papers Series 2003-614, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2003-614
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    Cited by:

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    2. Alain Delacroix & Etienne Wasmer, 2007. "Job and Workers Flows in Europe and the US: Specific Skills or Employment Protection?," Sciences Po publications info:hdl:2441/9938, Sciences Po.
    3. Wasmer, Etienne, 2002. "Interpreting Europe and US labor markets differences: the specificity of human capital investments," Arbetsrapport 2003:9, Institute for Futures Studies.
    4. 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.
    5. Anja Deelen, 2011. "Wage-Tenure Profiles and Mobility," CPB Discussion Paper 198, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Lalé, Etienne, 2012. "Trends in occupational mobility in France: 1982–2009," Labour Economics, Elsevier, vol. 19(3), pages 373-387.
    7. Etienne Wasmer & Peter Fredriksson & Ana Lamo & Julian Messina & Giovanni Peri, 2005. "The Macroeconomics of Education," Sciences Po publications info:hdl:2441/9064, Sciences Po.
    8. Amynah Vanessa Gangji & Robert Plasman, 2007. "The Matthew effect of unemployment: how does it affect wages in Belgium," DULBEA Working Papers 07-19.RS, ULB -- Universite Libre de Bruxelles.
    9. Julie L. Hotchkiss & M. Melinda Pitts & John C. Robertson, 2004. "Wage gains among job changers across the business cycle:> insight from state administrative data," FRB Atlanta Working Paper 2004-19, Federal Reserve Bank of Atlanta.
    10. Anil Duman, 2010. "Risks in the labor market and social insurance preferences: Germany and the USA," International Journal of Social Economics, Emerald Group Publishing, vol. 37(2), pages 150-164, January.
    11. 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.
    12. Barry, Frank & Walsh, Frank, 2008. "Gains and losses from sectoral relocation: A review of theory and empirics," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 4-16, March.

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    More about this item

    Keywords

    Wage losses; Unemployment; Displaced workers; Returns to seniority; Match heterogeneity;
    All these keywords.

    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
    • 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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