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When a Door Closes, a Window Opens? Long-term Labor Market Effects of Involuntary Separations


Balestra, Simone; Backes-Gellner, Uschi (2015). When a Door Closes, a Window Opens? Long-term Labor Market Effects of Involuntary Separations. Swiss Leading House "Economics of Education" Working Paper 72, University of Zurich.

Abstract

This study estimates the earning losses of workers experiencing an involuntary job separation. We employ, for the first time in the earning losses literature, a Poisson pseudo-maximum-likelihood estimator with fixed effects that has several advantages with respect to conventional fixed effects models. The Poisson estimator allows considering the full set of involuntary separations, including those with zero labor market earnings because of unemployment. By including individuals with zero earnings and by using our new method, the loss in the year of separation becomes larger than in previous studies. The loss starts with roughly 30 percent and, although it quickly shrinks, it remains at around 15 percent in the following years. In addition, we find that compared to other reasons for separation, the earning loss pattern is unique for involuntary separations, because no other type of separation implies such permanent scarring. This latter finding makes us confident that the self-reported involuntariness of a separation is a reliable source of information.

Abstract

This study estimates the earning losses of workers experiencing an involuntary job separation. We employ, for the first time in the earning losses literature, a Poisson pseudo-maximum-likelihood estimator with fixed effects that has several advantages with respect to conventional fixed effects models. The Poisson estimator allows considering the full set of involuntary separations, including those with zero labor market earnings because of unemployment. By including individuals with zero earnings and by using our new method, the loss in the year of separation becomes larger than in previous studies. The loss starts with roughly 30 percent and, although it quickly shrinks, it remains at around 15 percent in the following years. In addition, we find that compared to other reasons for separation, the earning loss pattern is unique for involuntary separations, because no other type of separation implies such permanent scarring. This latter finding makes us confident that the self-reported involuntariness of a separation is a reliable source of information.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
JEL Classification:J63, C23
Language:English
Date:2015
Deposited On:29 Nov 2012 14:18
Last Modified:18 Mar 2022 09:39
Series Name:Swiss Leading House "Economics of Education" Working Paper
OA Status:Green
Related URLs:https://ideas.repec.org/p/iso/educat/0072.html
https://www.zora.uzh.ch/id/eprint/125423/
Other Identification Number:merlin-id:7463

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