The Sources of the Wage Losses of Displaced Workers

Abstract

We evaluate the sources of wage losses of workers displaced due to firm closure by comparison of workers’ wages before and after displacement. We decompose the sources of the wage losses into the contribution of firm, match quality, and job title fixed effects. Sorting into lower paying job titles represents the largest component of the monthly wage loss of displaced workers, accounting for 37 percent of the total average monthly wage loss compared to 31 percent for the firm and 32 percent for the match effects. With respect to the hourly wage losses, job title effects account for 46 percent of the total loss, while firm and match effects contribute in equal shares representing each 27 percent of the loss.