The sources of the wage losses of displaced workers

: the italian case

Abstract

Exploiting a well-documented matched employer-employee dataset for Italy over the 1975-1997 period, this research assesses the sources of the wage losses of workers displaced due to firm closure based on the comparison of workers’ wages before and after displacement jobs. With this aim, we estimate a three way high-dimensional fixed effects regression model that allows us to decompose, according to the Gelbach (2016) formula, the sources of the wage losses into the contribution of worker, firm, and match-quality fixed effects. According to our estimation, we find that post-displacement wages are 11.5 log points lower than pre-displacement wages, i.e., 12.18 percent less than average pre-displacement wages. Specifically, a big part of this change in wage losses comes from displaced workers moving into worse matches. Moreover, in contrast to the previous literature, we find that displaced workers are going into better paying firms. Finally, we estimate the change in firm and match-quality fixed effects, which capture the impact of permanent differences across workers in observed and unobserved characteristics. The results suggest that a change in region to the Northern Italy and a longer time unemployed, drive the workers into a better firms and worse matches.

Date of Award	29 Jun 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Pedro Raposo (Supervisor)