The Echo of Job Displacement

37 Pages Posted: 11 Nov 2003

See all articles by Marcus Eliason

Marcus Eliason

IFAU - Institute for Labour Market Policy Evaluation

Donald Storrie

Göteborg University - Department of Economics

Date Written: October 2003

Abstract

This paper examines whether the loss of a job increases the likelihood of future difficulties on the labour market. We study displacement resulting from all plant closures (with ten or more employees) in Sweden in 1987 and follow their labor market outcome up to 1999. The control group is extracted from a random sample of non-displaced employees by matching on propensity scores. We find a rapid and almost total initial recovery of those displaced in 1987 compared to the control group up to 1990, both with respect to employment and unemployment measures. However, with the advent of the deep recession in 1990, the two groups again diverge. There is some relative recovery in the mid to late 1990s. However, by the end of the 1990s, the echo of the job loss 13 years earlier had still not subsided. We attribute the long-term effects as being either due to recurrent loss of match-specific capital or statutory seniority lay-offs rules.

Keywords: Plant closure, displaced workers, unemployment scarring, linked employer-employee data, propensity score matching

JEL Classification: J63, J64, J65

Suggested Citation

Eliason, Marcus and Storrie, Donald, The Echo of Job Displacement (October 2003). Available at SSRN: https://ssrn.com/abstract=455420 or http://dx.doi.org/10.2139/ssrn.455420

Marcus Eliason

IFAU - Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden

Donald Storrie (Contact Author)

Göteborg University - Department of Economics ( email )

Box 640
SE 405 30 Gothenburg
Sweden

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