 Coping with labor market risk: Formal job loss and earnings dynamics in IndiaGunjan Kumari, Neha Gupta and K. Narayanan Economic Modelling, 2025, vol. 151, issue C Abstract: This paper examines earnings dynamics of workers following the loss of formal employment, an area relatively underexplored in the context of developing economies like India. Leveraging high-frequency Consumer Pyramids Household Survey data, we document considerable churn in formal sector employment, disproportionately affecting low-productivity workers. Employing a dynamic difference-in-differences framework, we find that displacement from formal employment leads to a sharp and sustained decline in earnings. Contrary to prevailing evidence, workers displaced during COVID-19 downturn experienced a relatively faster earnings recovery than those displaced in pre-COVID period, highlighting their resilience against shock. Further, we find significant heterogeneity in post-displacement earnings losses, with sharper declines for workers from skill-intensive industries and occupations, and limited variation across education or prior earnings levels. Despite self-insurance efforts, formal job displacement results in substantial household income and welfare losses, highlighting the limitations of informal coping mechanisms and the need for public safety nets. Keywords: Formal job loss; Earnings; Self-employment; Wage-employment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:151:y:2025:i:c:s0264999325002251 DOI: 10.1016/j.econmod.2025.107230 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.