Abstract
This dissertation is composed of three essays. In the first essay of this dissertation, I re
examine the effect of industrial mobility on the cost of w orker displacement. W hile the
hum an capital implications of this regularity are well understood, no current m odel can
explain w hy a displaced w orker w ould ever choose to "switch." I develop a m atch-based
model of wages and endogenous mobility an d show that switching industries may, in
deed, be optimal for some "m ism atched" workers. I then use data on displaced w orkers
to re-estimate the cost of switching industries that controls for the endogeneity of indus
trial mobility. I find that switching industries is an optim al decision from the point of view
of individual displaced workers - i.e. that losses w ould have been even larger h ad they
"stayed." The results suggest that skill m ism atch and the resulting inability of some w ork
ers to re-match their task-specific skills via reem ploym ent is an im portant determ inant of
the observed costs of w orker displacement.
In the second essay, I estimate the degree of heterogeneity in the outcom es of displaced
w orkers and analyze the extent to w hich these heterogeneous experiences can be explained
by observable (or "systematic") factors as opposed to unobserved (or "idiosyncratic") fac
tors. To this end, I use data on displaced w orkers to estimate the stan d ard deviation of
earnings losses following displacement. I find statistically significant heterogeneity at the
lower bound, which is equal to about half of the m ean effect each year follow ing displace
ment. Once I control for systematic differences in observable characteristics, the rem aining
idiosyncratic variation is estim ated to be about 20%-40% less than the total variation in the
first few years following displacem ent and 50%-80% less than the total variation six to
eight years after displacement. Systematic variation, however, remains fairly large and
Abstract
This dissertation is composed of three essays. In the first essay of this dissertation, I re
examine the effect of industrial mobility on the cost of w orker displacement. W hile the
hum an capital implications of this regularity are well understood, no current m odel can
explain w hy a displaced w orker w ould ever choose to "switch." I develop a m atch-based
model of wages and endogenous mobility an d show that switching industries may, in
deed, be optimal for some "m ism atched" workers. I then use data on displaced w orkers
to re-estimate the cost of switching industries that controls for the endogeneity of indus
trial mobility. I find that switching industries is an optim al decision from the point of view
of individual displaced workers - i.e. that losses w ould have been even larger h ad they
"stayed." The results suggest that skill m ism atch and the resulting inability of some w ork
ers to re-match their task-specific skills via reem ploym ent is an im portant determ inant of
the observed costs of w orker displacement.
In the second essay, I estimate the degree of heterogeneity in the outcom es of displaced
w orkers and analyze the extent to w hich these heterogeneous experiences can be explained
by observable (or "systematic") factors as opposed to unobserved (or "idiosyncratic") fac
tors. To this end, I use data on displaced w orkers to estimate the stan d ard deviation of
earnings losses following displacement. I find statistically significant heterogeneity at the
lower bound, which is equal to about half of the m ean effect each year follow ing displace
ment. Once I control for systematic differences in observable characteristics, the rem aining
idiosyncratic variation is estim ated to be about 20%-40% less than the total variation in the
first few years following displacem ent and 50%-80% less than the total variation six to
eight years after displacement. Systematic variation, however, remains fairly large and
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