The next RITM Economics Seminar will take place on Monday 30 November, Online, from 11:00 to 12:00. Camille Hémet (PSE) will present “Understanding the Reallocation of Displaced Workers to Firms” avec Paul Brandily et Clement Malgouyres.
Using matched employer-employee data from France, we estimate the size of earnings loss following a layoff for economic reasons. In line with a large literature we find that displaced workers lose in earnings both because of a decline in hours worked (especially in the short run) and because of lower re-employment hourly wages. We find that loss in employer wage premium—proxied by firm fixed- effects in the framework developed by Abowd et al. (1999)—drives a sizable share of losses in earnings. Strikingly, displaced workers also tend to be re-employed by more productive firms, even though productivity and firm wage premium are positively correlated in the cross-section of firms. The pattern of reallocation is suggestive of a loss in bargaining power rather than an inefficient reallocation toward low productivity employers. Finally, to shed light on that aspect, we use administrative data on reservation wage to show that workers who can, tend to re-allocate toward firms that remunerate labor better.