Working Paper

Job Ladders and Earnings of Displaced Workers

Abstract: Workers who suffer job displacement experience surprisingly large and persistent earnings losses. This paper proposes an explanation for this robust empirical puzzle in a model of search over match-quality with a significant job ladder. In addition to capturing the depth and persistence of displaced-worker-earnings losses, the model is able to match a) separation rates by tenure; b) the empirical decomposition of earnings losses into reduced wages and employment; c) observed wage dispersion; d) the pattern of employer-to-employer transitions after layoff, and e) the degree of serial correlation in separations.

Keywords: Diversity; earnings; match-quality; search; Displacement;

JEL Classification: J64; J63; D83; E24;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2015-09-01

Number: 1514

Pages: 54 pages