Decomposing the Wage Losses of Displaced Workers: The Role of the Reallocation of Workers into Firms and Job Titles

41 Pages Posted: 4 Sep 2015

See all articles by Pedro S. Raposo

Pedro S. Raposo

Tilburg University - Center for Economic Research (CentER)

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

Anabela Jesus Moreira Carneiro

Universidade do Porto - Faculdade de Economia (FEP)

Abstract

Using an unusually rich matched employer-employee-job title data set for Portugal, this paper evaluates the sources of wage losses of workers displaced due to firm closure based on the comparison of workers' wages differentials before and after displacement. Potential wage losses of displaced workers can be related to firm, job title, and match heterogeneity in the pre- and post-displacement jobs. In this vein, we estimate a three-way high-dimensional fixed effects regression model that enables us to decompose the sources of the wage losses into the contribution of firm, job title, and match fixed effects. The worker-firm match plays a very sizable role. We found that the allocation of workers into poorer matches accounts for 38 percent of the total average wage loss. Sorting among firms accounts for 36 percent. Job downgrading also plays a significant role in explaining the wage loss of displaced workers, accounting for the remaining 26 percent.

Keywords: match effects, job title, high-dimensional fixed effects, displaced, wage losses

JEL Classification: J31, J63, J65, E24

Suggested Citation

Raposo, Pedro S. and Portugal, Pedro and Carneiro, Anabela Jesus Moreira, Decomposing the Wage Losses of Displaced Workers: The Role of the Reallocation of Workers into Firms and Job Titles. IZA Discussion Paper No. 9220, Available at SSRN: https://ssrn.com/abstract=2655241

Pedro S. Raposo (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Pedro Portugal

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal
+351 21 313 0000 (Phone)
+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Anabela Jesus Moreira Carneiro

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

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