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Working Paper

Job Ladders and Earnings of Displaced Workers

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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.
Topics
Labor economics
09.03.2015ISSN 2573-7953 WP 15-14DOI 10.26509/frbc-wp-201514
Keywords displacement, earnings, search, match-quality
JEL Classification Codes D83, E24, J63, J64

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Krolikowski, Pawel M. 2015. “Job Ladders and Earnings of Displaced Workers.” Federal Reserve Bank of Cleveland, Working Paper No. 15-14. https://doi.org/10.26509/frbc-wp-201514