Skill Mismatch and the Costs of Job Displacement

Frank Neffke, Ljubica Nedelkoska (ljubica_nedelkoska@hks.harvard.edu) and Simon Wiederhold (simon.wiederhold@iwh-halle.de)
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Ljubica Nedelkoska: Center for International Development at Harvard University

No 59, Growth Lab Working Papers from Harvard's Growth Lab

Abstract: When workers are displaced from their jobs in mass layoffs or firm closures, they experience lasting adverse labor market consequences. We study how these consequences vary with the amount of skill mismatch that workers experience when returning to the labor market. Using novel measures of skill redundancy and skill shortage, we analyze individuals’ work histories in Germany between 1975 and 2010. We estimate difference-in-differences models, using a sample in which we match displaced workers to statistically similar non-displaced workers. We find that displacements increase the probability of occupational change eleven fold, and that the type of skill mismatch after displacement is strongly associated with the magnitude of post-displacement earnings losses. Whereas skill shortages are associated with relatively quick returns to the counterfactual earnings trajectories that displaced workers would have experienced absent displacement, skill redundancy sets displaced workers on paths with permanently lower earnings.

Keywords: job displacement; human capital; skill mismatch; occupational change (search for similar items in EconPapers)
JEL-codes: J24 J31 J63 J65 (search for similar items in EconPapers)
Date: 2022-04
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https://growthlab.cid.harvard.edu/files/growthlab/ ... -job-deplacement.pdf (application/pdf)

Related works:
Journal Article: Skill mismatch and the costs of job displacement (2024)
Working Paper: Skill mismatch and the costs of job displacement (2024)
Working Paper: Skill Mismatch and the Costs of Job Displacement (2022)
Working Paper: Skill Mismatch and the Costs of Job Displacement (2022)
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