Jung, Philip and Kuhn, Moritz (2012): Earnings losses and labor mobility over the life-cycle.
Download (470kB) | Preview
An extensive empirical literature has documented that workers with high tenure suffer large and persistent earnings losses when they get displaced. We study the reasons behind these losses in a tractable search model with a life-cycle dimension, endogenous job mobility, worker- and match-heterogeneity. The model reconciles key characteristics of the U.S. labor market: large average transition rates, a large share of stable jobs, and the earnings losses from displacement. We decompose the earnings losses and find that only 50% result from skill losses. Endogenous reactions and selection account for the remainder. Our findings have important implications for the welfare costs of displacement and labor market policy.
|Item Type:||MPRA Paper|
|Original Title:||Earnings losses and labor mobility over the life-cycle|
|English Title:||Earnings losses and labor mobility over the life-cycle|
|Keywords:||Earnings Losses; Life-Cycle; Labor-Market Transitions; Turbulence|
|Subjects:||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
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J63 - Turnover ; Vacancies ; Layoffs
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search
|Depositing User:||Moritz Kuhn|
|Date Deposited:||27. Jul 2012 13:41|
|Last Modified:||21. Feb 2013 21:45|
John M Abowd and Arnold Zellner. Estimating gross labor-force flows. Journal of Business & Economic Statistics, 3(3):254–83, June 1985.
Paul P. Biemer and John M. Bushery. Estimating the error in labor force data using markov latent class analysis. Survey Methodology, 26(2):139–152, 2000.
Arnaud Cheron, Jean-Olivier Hairault, and Francois Langot. Life-cycle equilibrium unemployment. IZA Discussion Papers 3396, Institute for the Study of Labor (IZA), March 2008.
Kenneth A. Couch and Dana W. Placzek. Earnings losses of displaced workers revisited. American Economic Review, 100(1):572–89, March 2010.
Steve Davis and Till von Wachter. Recessions and the costs of job loss. Brookings Papers on Economic Activity, 2011.
Wouter den Haan, Gary Ramey, and Joel Watson. Job destruction and propagation of shocks. American Economic Review, 90:482–498, 2000a.
Wouter Den Haan, Christian Haefke, and Garey Ramey. Shocks and institutions in a job matching model. NBER Working Paper 8463, 2001.
Wouter J. den Haan, Garey Ramey, and Joel Watson. Job destruction and the experiences of displaced workers. Carnegie-Rochester Conference Series on Public Policy, 52(1):87–128, June 2000b.
Francis X Diebold, David Neumark, and Daniel Polsky. Job stability in the united states. Journal of Labor Economics, 15(2):206–33, April 1997.
Jan Eeckhout and Philipp Kircher. Identifying sorting - in theory. working paper, 2012.
Julen Esteban-Pretel and Junichi Fujimoto. Life-cycle labor search with stochastic match quality. CIRJE F-Series CIRJE-F-783, CIRJE, Faculty of Economics, University of Tokyo, January 2011.
Bruce Fallick and Charles A. Fleischman. Employer-to-employer flows in the u.s. labor market: the complete picture of gross worker flows. Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.), 2004.
Henry S. Farber. Are lifetime jobs disappearing? job duration in the united states: 1973-1993. NBER Working Papers 5014, National Bureau of Economic Research, Inc, February 1995.
Henry S. Farber. Employment insecurity: The decline in worker-firm attachment in the united states. Working Papers 1056, Princeton University, Department of Economics, Center for Economic Policy Studies., June 2008.
Shuaizhang Feng and Yingyao Hu. Misclassification errors and the underestimation of u.s. unemployment rates, 2010.
Shigeru Fujita. Declining labor turnover and turbulence. working paper, 2011a.
Shigeru Fujita. Reality of on-the-job search. Federal Reserve Bank of Philadelp working paper NO. 10-34/R, 2011b.
Shigeru Fujita and Garey Ramey. The cyclicality of separation and job finding rates. International Economic Review, 50(2):415–430, 2009.
Robert E Hall. The importance of lifetime jobs in the u.s. economy. American Economic Review, 72(4):716–24, September 1982.
J.A. Hausman, Jason Abrevaya, and F.M. Scott-Morton. Misclassification of the dependent variable in a discrete-response setting. Journal of Econometrics, 87(2):239 – 269, 1998.
Luke Haywood and Jean-Marc Robin. Looking for jobs with good pay and good working conditions. working paper, 2012.
Jonathan Heathcote, Fabrizio Perri, and Giovanni L. Violante. Unequal we stand: An empirical analysis of economic inequality in the united states: 1967-2006. Review of Economic Dynamics, 13(1):15–51, January 2010.
Louis S. Jacobson, Robert J. LaLonde, and Daniel G. Sullivan. Earnings losses of displaced workers. American Economic Review, 83(4):685–709, 1993.
Boyan Jovanovich. Job matching and the theory of turnover. Journal of Political Economy, 87:972–990, 1979.
Philip Jung and Keith Kuester. The (un)importance of unemployment fluctuations for the welfare cost of business cycles. JEDC, 35(10):17441768, 2011.
Lars Ljungqvist and Thomas Sargent. The european unemployment dilemma. Journal of Political Economy, 106, 1998.
Lars Ljungqvist and Thomas J. Sargent. Two questions about european unemployment. Econometrica, 76(1):1–29, 01 2008.
Hamish Low, Costas Meghir, and Luigi Pistaferri. Wage risk and employment risk over the life cycle. American Economic Review, 100(4):1432–67, September 2010.
Brigitte C. Madrian and Lars John Lefgren. A note on longitudinally matching current population survey (cps) respondents. Working Paper 247, National Bureau of Economic Research, November 1999.
Guido Menzio, Irina A. Telyukova, and Ludo Visschers. Directed search over the life cycle. NBER Working Papers 17746, National Bureau of Economic Research, Inc, 2012.
Dale Mortensen and Christopher Pissarides. Job creation and job destruction in the theory of unemployment. Review of Economic Studies, 61(3):397–415, 1994.
Giuseppe Moscarini. Job matching and the wage distribution. Econometrica, 73(2):481–516, 2005. ISSN 1468-0262.
Barbara Petrongolo and Christopher A. Pissarides. Looking into the black box: A survey of the matching function. Journal of Economic Literature, 2001(2):390–431, 2001.
James M. Poterba and Lawrence H. Summers. Reporting errors and labor market dynamics. Econometrica, 54(6):1319–1338, 1986.
Christopher J Ruhm. Are workers permanently scarred by job displacements? American Economic Review, 81(1):319–24, March 1991.
Peter Rupert. Wage and employer changes over the life cycle. Technical report, Federal Reserve Bank of Cleveland, April 2004.
Robert Shimer. The cyclical behavior of equilibrium unemployment, vacancies, and wages: Evidence and theory. American Economic Review, 95(1):25–49, 2005.
Robert Shimer. Reassessing the ins and outs of unemployment. Review of Economic Dynamics, 15(2):127 – 148, 2012.
Jos Ignacio Silva and Manuel Toledo. Labor turnover costs and the cyclical behavior of vacancies and unemployment. Macroeconomic Dynamics, 13(S1):76–96, 2009.
Ann Huff Stevens. Persistent effects of job displacement: The importance of multiple job losses. Journal of Labor Economics, 1:165–188, 1997.
Till von Wachter, Jae Song, and Joyce Manchester. Long-term earnings losses due to masslayoffs during the 1982 recession: An analysis using longitudinal administrative data from 1974 to 2004. Technical report, Columbia University, April 2009.
Available Versions of this Item
- Earnings losses and labor mobility over the life-cycle. (deposited 27. Jul 2012 13:41) [Currently Displayed]