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Estimating wage losses of displaced workers in Germany

Michael Burda () and Antje Mertens

No 1999,35, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: This paper investigates the effect of displacement on reemployment wages of socially insured West German workers who became unemployed in 1986. Because detailed information on the cause of job loss is unavailable, displacement status is imputed using a probit estimated on the German Socioeconomic Panel (GSOEP). Average wages of those classified as displaced decline only slightly upon reemployment. The lowest earnings quartile, in which displacement is concentrated, even gains slightly (+2%), while wage growth losses for the upper three quartiles are comparable to US findings (-17%). Large wage losses are associated with changes of industry, but not of firm. Our results are robust to controls for heterogeneity, for recalls, and to the probit specification used, and are confirmed in the smaller GSOEP file.

Keywords: displaced workers; wages; tenure; wage rigidity (search for similar items in EconPapers)
JEL-codes: J30 J63 J65 (search for similar items in EconPapers)
Date: 1999
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