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Working Paper

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.

Suggested Citation

Krolikowski, Pawel M. 2015. “Job Ladders and Earnings of Displaced Workers.” Federal Reserve Bank of Cleveland, Working Paper No. 15-14.