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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title When a door closes, a window opens? Long-term labor market effects of involuntary separations
Organization Unit
  • Simone Balestra
  • Uschi Backes-Gellner
Item Subtype Original Work
Refereed Yes
Status Published in final form
  • English
Journal Title German Economic Review
Publisher Wiley-Blackwell Publishing, Inc.
Geographical Reach international
ISSN 1465-6485
Volume 18
Number 1
Page Range 1 - 21
Date 2017
Abstract Text 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% and, although it quickly shrinks, it remains at around 15% 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.
Digital Object Identifier 10.1111/geer.12086
Other Identification Number merlin-id:13556
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