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Choosing a Control Group for Displaced Workers

Pawel Krolikowski ()

No 1605, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: The vast majority of studies on the earnings of displaced workers use a control group of continuously employed workers to examine the effects of initial displacements. This approach implies long-lived earnings reductions following displacement even if these effects are not persistent, overstating the losses relative to the true average treatment effect. This paper’s approach isolates the impact of an average displacement without imposing continuous employment on the control group. In a comparison of the standard and alternative approaches using PSID data, the estimated long-run earnings losses fall dramatically from 25 percent to 5 percent. Model simulations reinforce these empirical findings.

Keywords: Displacement; earnings; control group; treatment event (search for similar items in EconPapers)
JEL-codes: E24 J63 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-mac
Date: 2016-02-02, Revised 2017-08-17
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Journal Article: Choosing a Control Group for Displaced Workers (2018) Downloads
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