Understanding the Scarring Effect of Recessions

2022/03/31 by Christopher Huckfeldt · 2 citations
Economics, Econometrics and Finance · #Labor market dynamics and wage inequality #Firm Innovation and Growth #Italy: Economic History and Contemporary Issues

paper · doi:10.1257/aer.20160449

Abstract

This paper documents that the earnings cost of job loss is concentrated among workers who find reemployment in lower-skill occupations, and that the cost and incidence of such occupation displacement is higher for workers who lose their job during a recession. I propose a model where hiring is endogenously more selective during recessions, leading some unemployed workers to optimally search for reemployment in lower-skill jobs. The model accounts for existing estimates of the size and cyclicality of the present value cost of job loss, and the cost of entering the labor market during a recession. (JEL E24, E32, J23, J24, J31, J63, J64)

Citations

• OCCUPATIONAL SPECIFICITY OF HUMAN CAPITAL*
• Earnings Losses of Displaced Workers Revisited
• Sources of Displaced Workers’ Long-Term Earnings Losses

Cited by

• Bank Branching Strategies in the 1997 Thai Financial Crisis and Local Access to Credit
• Who Scars the Easiest? College Quality and Earnings Losses from Graduating into a Recession

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