Labor displacement effects over inter-temporal earnings mobility

Abstract

I study how involuntary job loss affects workers' inter-temporal labor earnings mobility. I use Panel Study Income Dynamics (PSID) 1973-2017 survey waves to construct transition probability matrices and compute ordered logistic regression estimates. I find that being displaced increases downward mobility compared to never displaced workers. The reduction of hours worked, large spells of unemployment and the destruction of firm-specific human capital depreciate the market value of a displaced worker generating significant labor income losses.