Working Paper: NBER ID: w30162
Authors: Johannes F. Schmieder; Till M. von Wachter; Jörg Heining
Abstract: We document the sources behind the costs of job loss over the business cycle using administrative data from Germany. Losses in annual earnings after displacement are large, persistent, and highly cyclical, nearly doubling in size during downturns. A large part of the long-term earnings losses and their cyclicality is driven by declines in wages. Key to these long-lasting wage declines and their cyclicality are changes in employer characteristics, as displaced workers switch to lower-paying firms. Changes in characteristics of workers or displacing firms explain little of the cyclicality, though non-employment durations correlated with losses in employer effects play a role.
Keywords: Job Displacement; Earnings Losses; Wage Cyclicality; Germany
JEL Codes: J0; J2; J31; J60; J63; J64; 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 Reduction (H55) |
| Job Displacement (J63) | Wage Losses (J31) |
| Recession (E32) | Earnings Losses (J17) |
| Establishment Wage Premiums (J31) | Wage Losses (J31) |
| Nonemployment Duration (J64) | Cyclicality of Wage Losses (J65) |