A Distributional Analysis of Displacement Costs in an Economic Depression and Recovery

Tomi Kyyrä and Ossi Korkeamäki

No 465, Discussion Papers from VATT Institute for Economic Research

Abstract: We study the earnings losses of Finnish private sector workers who lost their jobs at two very different points in the business cycle. The first group was displaced in 1992 (depression period) and the second one in 1997 (recovery period). The focal point of the analysis is the quantile displacement effect, the change in the earnings distribution due to involuntary job separation. We use mass layoffs and plant closures to identify groups of workers who were displaced from exogenous causes. The effect of displacement is strongest at the lower end of the earnings distribution, and small or negligible at the upper end. Women and those displaced during the depression period are subject to larger earnings losses.

Keywords: Displacement; earnings losses; unemployment; quantile regression; Income distribution; Tulonjako; Labour market; Työmarkkinat; Labor market and policies promoting economic growth; Työmarkkinat ja kasvua tukeva politiikka (search for similar items in EconPapers)
Date: 2008
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