Job Ladder, Human Capital, and the Cost of Job Loss

Audoly, Richard; De Pace, Federica; Fella, Giulio

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Job Ladder, Human Capital, and the Cost of Job Loss

Abstract: High-tenure workers who lose their jobs experience a large and prolonged fall in wages and earnings. To quantify the forces behind this empirical regularity, we propose a rich structural model of the labor market with heterogeneous firms, on-the-job search, and firm-specific and general human capital. By jointly matching moments of workers’ mobility and wages, the model can replicate the losses in earnings and wages observed in the data. The loss of a job with a more productive employer is the primary driver of the cumulated wage losses post-displacement (50 percent), followed by the loss of firm-specific human capital (30 percent).

Keywords: job loss; on-the-job search; human capital;

JEL Classification: J0; J3; J6;