Understanding the Scarring Effect of Recessions

Christopher Huckfeldt
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Christopher Huckfeldt: Cornell University

No 1207, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: This paper documents that the earnings cost of job loss is concentrated among workers who find reemployment in lower-paying occupations, and that the incidence of such occupation displacement is higher for workers who lose their job during a recession. I propose a model where hiring is endogenously more selective during recessions, forcing some unemployed workers to search for lower-skill jobs. In accounting for the cost and cyclical incidence of occupation displacement, the model accounts for existing estimates of the present value cost of job loss during expansions and recessions, and the cost of entering the labor market during a recession.

Date: 2018
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:1207

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