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

JEL Classification: D83; E24; J63; J64;

https://doi.org/10.26509/frbc-wp-201514

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2015-09-03

Number: 1514