The Heterogeneous Earnings Impact of Job Loss Across Workers, Establishments, and Markets
Using generalized random forests and rich Swedish administrative data, we show that the earnings effects of job displacement due to establishment closures are extremely heterogeneous across and within (observable) worker types, establishments, and markets. The decile with the largest predicted effects loses 50 percent of annual earnings the year after displacement and losses accumulate to 200 percent over 7 years. The least affected decile experiences only marginal losses of 6 percent in the year after displacement. Prior to displacement workers in the most affected decile were lower paid and had negative earnings trajectories. Workers with large predicted effects are more sensitive to adverse market conditions than other workers. When restricting attention to simple targeting rules, the subgroup consisting of older workers in routine-task intensive jobs has the highest predictable effects of displacement.
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