Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320483 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17889
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We analyze the full distribution of displaced workers' earnings losses using a new method that combines matching and synthetic control group approaches at the individual level. We find that the distribution of earnings losses is highly skewed. Average losses, as estimated by conventional event studies, are driven by a small number of workers who suffer catastrophic losses, while most recover quickly. Observable worker characteristics explain only a small fraction of the variance in earnings losses. Instead, we find substantial heterogeneity in earnings losses even among workers displaced by the same firm who have identical observed characteristics such as education, age, and gender. Workers with minimal earnings losses adjust quickly by switching industries, occupations, and especially regions, while comparable workers with catastrophic losses adjust slowly, even though they are forced to make comparable numbers of switches in the long run.
Subjects: 
synthetic control groups
distributions of treatment effects
displacement losses
JEL: 
J24
J64
O30
Document Type: 
Working Paper

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