Understanding the Reallocation of Displaced Workers to Firms

Paul Brandily (1, 2) , Camille Hémet (1, 2) , Clément Malgouyres (1, 2, 3)

1 PSE - Paris School of Economics
2 PJSE - Paris Jourdan Sciences Economiques
3 IPP - Institut des politiques publiques

We investigate the cost of job displacement using administrative data from France that covers employer and employee over both employment and unemployment spells. We find that displaced workers experience earnings losses both because of a decline in hours worked (especially in the short run) and because of lower re-employment hourly wages. In line with an active literature, we find that loss in employer-specific wage premium drives most of earnings losses in the long run. However, displaced workers tend to be re-employed by more productive firms. This result contrasts strikingly with the strong positive correlation between firms' productivity and wage premium in the cross-section. We further show that the re-employment firms also display lower labor shares. Overall, our results show that the commonly estimated loss in wage premium following job displacement does not reflect a reallocation toward low productivity firms. Instead they are most consistent with a loss in bargaining power and reallocation towards low-labor share firms.

Mots clés: Displaced workers; Wage; Reallocation; Labor share

Domaines: Economies et finances

Paul Brandily, Camille Hémet, Clément Malgouyres. Understanding the Reallocation of Displaced Workers to Firms. 2020. ⟨halshs-03082302v1⟩