In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers
59 Pages Posted: 14 Oct 2004
Date Written: October 2004
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
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