The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany

Johannes Schmieder, Till von Wachter and Jörg Heining

American Economic Review, 2023, vol. 113, issue 5, 1208-54

Abstract: We document the sources behind the costs of job loss over the business cycle using administrative data from Germany. Losses in annual earnings after displacement are large, persistent, and highly cyclical, nearly doubling in size during downturns. A large part of the long-term earnings losses and their cyclicality is driven by declines in wages. Key to these long-lasting wage declines and their cyclicality are changes in employer characteristics, as displaced workers switch to lower-paying firms. These losses increase with duration of nonemployment. Changes in characteristics of displaced workers or displacing firms, and other post-job loss career outcomes explain little of the cyclicality.

JEL-codes: E24 E32 J31 J63 J64 J65 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (52)

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Working Paper: The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany (2022)
Working Paper: The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany (2022)
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DOI: 10.1257/aer.20200252

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