Heterogeneous Effects of Job Displacement on Earnings
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Heterogeneous Effects of Job Displacement on Earnings Afrouz Azadikhah Jahromi1 · Brantly Callaway2 Received: 22 June 2019 / Accepted: 12 October 2020 © Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract This paper considers how the effect of job displacement varies across different individuals. In particular, our interest centers on features of the distribution of the individual-level effect of job displacement. Identifying features of this distribution is particularly challenging—e.g., even if we could randomly assign workers to be displaced or not, many of the parameters that we consider would not be point identified. We exploit our access to panel data, and our approach relies on comparing outcomes of displaced workers to outcomes the same workers would have experienced if they had not been displaced and if they maintained the same rank in the distribution of earnings as they had before they were displaced. Using data from the Displaced Workers Survey, we find that displaced workers earn about $157 per week less, on average, than they would have earned if they had not been displaced. We also find that there is substantial heterogeneity. We estimate that 42% of workers have higher earnings than they would have had if they had not been displaced and that a large fraction of workers have experienced substantially more negative effects than the average effect of displacement. Finally, we also document major differences in the distribution of the effect of job displacement across education levels, sex, age, and counterfactual earnings levels. Throughout the paper, we rely heavily on quantile regression. First, we use quantile regression as a flexible (yet feasible) first step estimator of conditional distributions and quantile functions that our main results build on. We also use quantile regression to study how covariates affect the distribution of the individual-level effect of job displacement. Keywords Job displacement · Joint distribution of potential outcomes · Distribution of the treatment effect · Quantile regression · Heterogeneous effects · Rank invariance JEL Classification J63 · C21
We thank Guest Editor Blaise Melly and an anonymous referee for a number of helpful comments. We also would like to thank Michael Bognanno, Bernd Fitzenberger, Weige Huang, Moritz Ritter, Jungmo Yoon, and participants at the Economic Applications of Quantile Regression 2.0 Conference for their comments and suggestions. Extended author information available on the last page of the article
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A. Azadikhah Jahromi, B. Callaway
1 Introduction A typical finding in the job displacement literature is that “the effect” of job displacement is large and persistent (see, for example, Jacobson et al. 1993 and much subsequent work). However, considering a single effect of job displacement ignores potential heterogeneity across individuals. Treatment effect heterogeneity is a general feature of many program evaluation problems in economics, but treatment effect heterogeneity is likely to be particularly important in
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