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Job Ladders and Earnings of Displaced Workers


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.

JEL Codes: D83, E24, J63, J64.

Keywords: displacement, earnings, search, match-quality.


Suggested citation: Krolikowski, Pawel, 2015. “Job Ladders and Earnings of Displaced Workers,” Federal Reserve Bank of Cleveland, Working Paper no. 15-14.

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