The Cost of Job Loss

Carlos Carrillo-Tudela, Kenneth Burdett and Melvyn G Coles

No 14428, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper identifies an equilibrium theory of wage formation and endogenous quit turnover in a labour market with on-the-job search, where risk averse workers accumulate human capital through learning-by-doing and lose skills while unemployed. Optimal contracting implies the wage paid increases with experience and tenure. Indirect inference using German data determines the deep parameters of the model. The estimated model not only reproduces the large and persistent fall in wages and earnings following job loss, a new structural decomposition finds foregone human capital accumulation (while unemployed) is the worker's major cost of job loss.

Keywords: Job search; Human capital accumulation; Job loss (search for similar items in EconPapers)
JEL-codes: J41 J42 J63 J64 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-dge, nep-hrm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Journal Article: The Cost of Job Loss (2020)
Working Paper: The cost of job loss (2015)
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