In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers

59 Pages Posted: 14 Oct 2004

See all articles by Till von Wachter

Till von Wachter

Columbia Business School - Economics Department; IZA Institute of Labor Economics

Stefan Bender

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Date Written: October 2004

Abstract

We exploit administrative data on young German workers and their employers to study the long-term effects of an early job loss. To account for non-random sorting of workers into firms with different turnover rates and for selective job mobility, we use changes over time in firm- and age-specific labor demand as an instrument for displacement. We find that wage losses of young job losers are initially 15% but fade to zero within five years. Only workers leaving very large establishments suffer persistent losses. A comparison of estimators implies that initial sorting, negative selection, and voluntary job mobility may have biased previous U.S. studies finding permanent effects of early displacements.

Keywords: job displacement, job search, initial assigment, adverse selection

JEL Classification: J63, J65

Suggested Citation

von Wachter, Till and Bender, Stefan, In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers (October 2004). IZA Discussion Paper No. 1348. Available at SSRN: https://ssrn.com/abstract=605243

Till Von Wachter (Contact Author)

Columbia Business School - Economics Department ( email )

420 West 118th Street
New York, NY 10027
United States

IZA Institute of Labor Economics

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

Stefan Bender

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany
+49 911 179 3082 (Phone)
+49 911 179 3297 (Fax)

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