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Reconsidering the Consequences of Worker Displacements: Firm versus Worker Perspective

Reconsidering the Consequences of Worker Displacements: Firm versus Worker Perspective

by Matthew Shapiro, Aaron Flaaen, Isaac Sorkin

Abstract

Displaced workers suffer persistent earnings losses. This stark finding has been established by following workers in administrative data after mass layoffs under the presumption that these are involuntary separations owing to economic distress. This paper examines this presumption 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 reason 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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