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Earnings Losses and Labor Mobility over the Lifecycle

Philip Jung () and Moritz Kuhn

No 6835, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Extensive literature demonstrates that workers with high tenure suffer large and persistent earnings losses when they are displaced. We study the reasons behind these losses in a tractable search model that includes a lifecycle dimension, endogenous job mobility, and worker- and match-heterogeneity. The model jointly explains key characteristics of the U.S. labor market such as large average transition rates, a large share of stable jobs, and earnings losses after displacement. We decompose earnings losses and find that only 50% result from wage loss, and endogenous reactions and selection account for the remainder. These findings have important implications for welfare costs of displacement and labor market policies.

Keywords: earnings losses; lifecycle; labor-market transitions; turbulence (search for similar items in EconPapers)
JEL-codes: E24 J63 J64 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2012-09
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Related works:
Working Paper: Earnings losses and labor mobility over the lifecycle (2016) Downloads
Working Paper: Earnings losses and labor mobility over the lifecycle (2013) Downloads
Working Paper: Earnings losses and labor mobility over the life-cycle (2012) Downloads
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