Association for Public Policy Analysis & Management

I estimate the standard deviation of earnings losses following job displacement to analyze differences across displacement episodes and assess the earnings volatility of displaced workers. I find that the large earnings losses of displaced workers are highly variable: the estimated lower-bound of the standard deviation is more than half of the mean effect in each of the first eight years following displacement. Moreover, the estimates of the standard deviation do not materially decline after I remove the variation associated with commonly observed patterns of systematic earnings loss following displacement. The estimates suggest that worker displacement is associated with tremendous variation, representing high levels of idiosyncratic earnings risk.