Working Paper: CEPR ID: DP1209
Authors: Nicholas F. R. Crafts
Abstract: In this paper we examine the persistent effects of past wages of displaced workers on the probability of finding a new job and on wages in the new job. We use a new database looking at the post-displacement experience of a sample of Belgian workers who have lost their jobs because of a sizeable reduction in the work-force of their firm. We decompose past wages into a market return to human capital, a firm-specific component (the `firm effect'), and an individual component. We develop an information model of wages and test its predictions. These predictions are validated by the evidence on subsequent wages. We also find that spells of unemployment are long, but that re-employed workers suffer limited wage losses on re-employment. This suggests that some institutional constraints prevent wages from falling.
Keywords: economic growth; northern ireland; peripherality; supply-side
JEL Codes: N14; O47; O52; R58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| weak social capability (Z13) | Northern Ireland's disappointing TFP growth (O49) |
| adverse industrial relations (J53) | Northern Ireland's disappointing TFP growth (O49) |
| peripherality (D89) | TFP growth (O49) |
| peripherality (D89) | ideas gap (O36) |
| ideas gap (O36) | Northern Ireland's TFP growth (O49) |
| policy framework (D78) | TFP growth (O49) |
| policy framework (D78) | physical investment (G31) |
| Northern Ireland's TFP growth (O49) | UK regions' TFP growth (O49) |