Job Destruction and the Experiences of Displaced Workers

Wouter J. den Haan, Garey Ramey and Joel Watson

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: This paper evaluates a class of endogenous job destruction models based on how well they explain the observed experiences of displaced workers. We show that pure reallocation models in which relationship-specific productivity drifts downward over time are difficult to reconcile with the evidence on postdisplacement wages and displacement rates. Pure reallocation models with upward drift can explain the evidence, but implausibly large and persistent negative productivity shocks are required to generate displacements. Combining upward drift with outside benefits or moral hazard as additional motives for displacement makes it possible to explain the evidence with much smaller shocks. Propagation of aggregate shocks, welfare implications of displacement, upgrade of relationships in lieu of displacement, and learning effects are also discussed.

Keywords: engodenous; job; destruction (search for similar items in EconPapers)
Date: 1999-06-01
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Related works:
Journal Article: Job destruction and the experiences of displaced workers (2000)
Working Paper: Job Destruction and the Experiences of Displaced Workers (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucsdec:qt1rd0w96t

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