Your search

We examine administrative data on young German workers and their employers tostudy the long-term effects of an early career job loss. To account for nonrandomsorting of workers into firms with different turnover rates and for selective jobmobility, we use changes over time in firm- and age-specific labor demand as aninstrument for displacement. We find that wage losses of young job losers areinitially 15 percent, but drop to zero within five years. Only workers leaving verylarge establishments suffer persistent losses. A comparison of estimators impliesthat initial sorting, negative selection, and voluntary job mobility biases ordinaryleast squares estimates toward finding permanent negative effects of early displacements.(JEL J13, J23, J24, J62, J63, M53)