Working Paper: NBER ID: w26525
Authors: Brendan Moore; Judith Scott-Clayton
Abstract: We use employer-employee matched administrative data from Ohio to study the role of firm pay premiums in explaining the large, persistent earnings losses of displaced workers. We estimate that earnings for displaced workers from the mid-2000s are depressed by 22 percent after four years, consistent with prior work. Drawing upon empirical approaches from the displaced worker and firm heterogeneity literature, we then estimate how much of this earnings loss can be explained by the forfeiture of a favorable employer-specific pay premium. Our preferred estimate attributes one quarter (24 percent) of long-run earnings deficits to lost firm pay premiums. Such firm rents explain up to half the earnings deficits for those laid off from manufacturing firms and employers with particularly generous pay policies. We test for sensitivity to different samples from which we derive firm specific-pay premiums and definitions of displacement. Our estimates persist in a narrow range between 16 and 24 percent for the share explained by firm rents, adding to the evidence that firm rents do not explain the majority of earnings or wage losses sustained by displaced workers in the United States.
Keywords: No keywords provided
JEL Codes: J31; J63; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Job displacement (J63) | Earnings losses (J17) |
| Loss of firm-specific pay premiums (J33) | Earnings losses (J17) |
| Job displacement (J63) | Loss of firm-specific pay premiums (J33) |
| Loss of favorable firm-specific pay premiums (J33) | Earnings deficits for displaced manufacturing workers (J39) |