What Happens to Wages After Displacement?

Kaplan, David and Martinez, Gabriel and Robertson, Raymond (2005): What Happens to Wages After Displacement? Published in: Journal of the Latin American and Caribbean Economic Association , Vol. 5, No. 2 (2005): pp. 197-234.

Abstract

Faced with limited resources, policymakers need to know when and where to target support for displaced workers. The academic literature offers little support, presenting wide-ranging results with no consistent explanation for the observed differences in wages after workers are displaced. In this paper, we demonstrate that the heterogeneity found in the literature is consistent with varying market conditions. The results suggest that support for displaced workers can be more efficiently allocated by considering the timing and location of displacement.

• Item Type: MPRA Paper
• Institution: Instituto Tecnologico Autonomo de Mexico
• Language: English
• Keywords: Displaced Workers; Mexico
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J21 - Labor Force and Employment, Size, and Structure; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity

References

Abbring, Jaap H., and others. 2002. “Displaced Workers in the United States and the Netherlands.” In Losing Work, Moving on: International Perspectives on Worker Displacement, edited by Peter J. Kuhn, pp. 105–94. Kalamazoo: W. E. Upjohn Institute for Employment Research. Andalón-López, Mabel, and Luis López-Calva. 2002. “The Many Mexicos: Income Inequality and Polarization in Urban Mexico during the 1990s.” Paper prepared for the Cornell-LSE-WIDER Conference on Spatial Inequality. Cornell University, London School of Economics, and the World Institute for Development Economics Research, London, 28–30 June. Bender, Stefan, and others. 2002. “Worker Displacement in France and Germany.” In Losing Work, Moving on: International Perspectives on Worker Displacement, edited by Peter J. Kuhn, pp. 375–470. Kalamazoo: W. E. Upjohn Institute for Employment Research. Burda, Michael C., and Antje Mertens. 2001. “Estimating Wage Losses of Displaced Workers in Germany.” Labour Economics 8(1): 15–41. Caballero, Ricardo J., Eduardo M. R. A. Engle, and John C. Haltiwanger. 1997. “Aggregate Employment Dynamics: Building from Microeconomic Evidence.” American Economic Review 87(1): 115–37. Carrington, William J. 1993. “Wage Losses for Displaced Workers: Is It Really the Firm that Matters?” Journal of Human Resources 28(3): 435–62. Clark, Don P., Henry W. Herzog Jr., and Alan M. Schlottmann. 1998. “Import Competition, Employment Risk, and the Job-Search Outcomes of Trade-Displaced Manufacturing Workers.” Industrial Relations 37(2): 182–206. Conroy, Michael E., and Sarah E. West. 2000. “The Impact of NAFTA and the WTO on Chiapas and Southern Mexico.” In Poverty or Development: Global Restructuring and Regional Transformations in the U.S. South and the Mexican South, edited by Richard Tardanico and Mark Rosenberg, pp. 41–55. New York: Routledge. Couch, Kenneth A. 2001. “Earnings Losses and Unemployment of Displaced Workers in Germany.” Industrial and Labor Relations Review 54(3): 559–72. Davis, Steven J., and John C. Haltiwanger. 1992. “Gross Job Creation, Gross Job Destruction, and Employment Reallocation.” Quarterly Journal of Economics 107(3): 819–63. ———. 1999. “Gross Job Flows.” In Handbook of Labor Economics, vol. 3B, edited by Orley Ashenfelter and David Card. Amsterdam: Elsevier. De la Rica, Sara. 1995. “Evidence of Preseparation Earnings Losses in the Displaced Worker Survey.” Journal of Human Resources 30(3): 610–21. Fairris, David, and Edward Levine. 2004. “Declining Union Density in Mexico, 1984–2000.” Monthly Labor Review 127(9): 10–17. Fallick, Bruce C. 1996. “A Review of the Recent Empirical Literature on Displaced Workers.” Industrial and Labor Relations Review 50(1): 5–16. Farber, Henry S. 2003. “Job Loss in the United States, 1981–2001.” Working paper 471. Princeton University, Industrial Relations Section. Feenstra, Robert C., and Gordon H. Hanson. 1997. “Foreign Direct Investment and Relative Wages: Evidence from Mexico’s Maquiladoras.” Journal of International Economics 42(3): 371–93. Gonzaga, Gustavo. 2003. “Labor Turnover and Labor Legislation in Brazil.” Economía 4(1): 165–222. Hamermesh, Daniel S. 1989. “Labor Demand and the Structure of Adjustment Costs.” American Economic Review 79(4): 674–89. Hanson, Gordon H. 1998. “North American Economic Integration and Industry Location.” Oxford Review of Economic Policy 14(2): 30–44. Hashimoto, Masanori. 1979. “Bonus Payments, On-the-Job Training, and Lifetime Employment in Japan.” Journal of Political Economy 87(5, part 1): 1086–104. ———. 1981. “Firm-Specific Human Capital as a Shared Investment.” American Economic Review 71(3): 475–82. Heckman, James, and Carmen Pagés. 2000. “The Cost of Job Security Regulation: Evidence from Latin American Labor Markets.” Working paper 7773. Cambridge, Mass.: National Bureau of Economic Research. Helwig, Ryan T. 2001. “Worker Displacement in a Strong Labor Market.” Monthly Labor Review 124(6): 13–28. Howland, Marie, and George E. Peterson. 1988. “Labor Market Conditions and the Reemployment of Displaced Workers.” Industrial and Labor Relations Review 42(1): 109–22. Jacobson, Louis S., Robert J. LaLonde, and Daniel G. Sullivan. 1993a. “Earnings Losses of Displaced Workers.” American Economic Review 83(4): 685–709. ———. 1993b. The Costs of Worker Dislocation. Kalamazoo: W. E. Upjohn Institute for Employment Research. Kaplan, David, Gabriel Martínez González, and Raymond Robertson. 2004. “Worker and Job Flows in Mexico.” Macalester College. Kletzer, Lori G. 1998. “Job Displacement.” Journal of Economic Perspectives 12(1): 115–36. Kreichel, Ben, and Gerard A. Pfann. 2003. “Heterogeneity among Displaced Workers.” Paper prepared for the conference on Analyses of Labor Reallocation. W. E. Upjohn Institute and the University of Michigan Business School, William Davidson Institute, Augusta, Mich., 21–23 August. Kuhn, Peter J. 2002. “Summary and Synthesis.” In Losing Work, Moving on: International Perspectives on Worker Displacement, edited by Peter J. Kuhn, pp. 1–104. Kalamazoo: W. E. Upjohn Institute for Employment Research. Maloney, William F. 1998. “Are Labor Markets in Developing Countries Dualistic?” Policy research working paper 1941. Washington: World Bank. ———. 2004. “Informality Revisited.” World Development 32(7): 1159–78. Maloney, William F., and Tom Krebs. 1999. “Quitting and Labor Turnover: Microeconomic Evidence and Macroeconomic Consequences.” Policy research working paper 2068. Washington: World Bank. Marcal, Leah E. 2001. “Does Trade Adjustment Assistance Help Trade-Displaced Workers?” Contemporary Economic Policy 19(1): 59–72. McLaughlin, Kenneth J. 1991. “A Theory of Quits and Layoffs with Efficient Turnover.” Journal of Political Economy 99(1): 1–29. Menezes-Filho, Naércio. 2004. “Costs of Displacement in Brazil.” University of São Paulo. Moffitt, Robert A. 1999. “ Models of Treatment Effects When Responses Are Heterogeneous.” Proceedings of the National Academy of Sciences 96(12): 6575–76. Panagides, Alexis, and Harry A. Patrinos. 1994. “Union-Nonunion Wage Differentials in the Developing World: A Case Study of Mexico.” Policy research working paper 1269. Washington: World Bank. Revenga, Ana, Michelle Riboud, and Hong Tan. 1994. “The Impact of Mexico’s Retraining Program on Employment and Wages.” World Bank Economic Review 8(2): 247–77. Robertson, Raymond. 2000. “Wage Shocks and North American Labor Market Integration.” American Economic Review 90(4): 742–64. ———. 2004. “Relative Prices and Relative Wages: Evidence from Mexico.” Journal of International Economics 64(2): 387–409. Robertson, Raymond, and Donald H. Dutkowsky. 2002. “Labor Adjustment Costs in a Destination Country: The Case of Mexico.” Journal of Development Economics 67(1): 29–54. Ruhm, Christopher J. 1991a. “Are Workers Permanently Scarred by Job Displacements?” American Economic Review 81(1): 319–24. ———. 1991b. “Displacement Induced Joblessness.” Review of Economics and Statistics 73(3): 517–22. Stevens, Ann Huff. 1995. “Long-Term Effects of Job Displacement: Evidence from the Panel Study of Income Dynamics.” Working paper 5343. Cambridge, Mass.: National Bureau of Economic Research. ———. 1997. “Persistent Effects of Job Displacement: The Importance of Multiple Job Losses.” Journal of Labor Economics 15(1, part 1): 165–88. ———. 2001. “Changes in Earnings Instability and Job Loss.” Industrial and Labor Relations Review 55(1): 60–78. Stevens, Margaret. 1994. “A Theoretical Model of On-the-Job Training with Imperfect Competition.” Oxford Economic Papers 46(4): 537–62.