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Reconsidering the Consequences of Worker Displacements: Firm versus Worker Perspective

Aaron B. Flaaen, Matthew D. Shapiro, Isaac Sorkin

NBER Working Paper No. 24077
Issued in November 2017, Revised in April 2018
NBER Program(s):Economic Fluctuations and Growth, Labor Studies, Monetary Economics

Prior literature has established that displaced workers suffer persistent earnings losses by following workers in administrative data after mass layoffs. This literature assumes that these are involuntary separations owing to economic distress. This paper examines this assumption by matching survey data on worker-supplied reasons for separations with administrative data. Workers exhibit substantially different earnings dynamics in mass layoffs depending on the rea- son for separation. Using a new methodology to account for the increased separation rates across all survey responses during a mass layoff, the paper finds earnings loss estimates that are surprisingly close to those using only administrative data.

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Document Object Identifier (DOI): 10.3386/w24077

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