Estimating wage losses of displaced workers in Germany

This paper employs the German Socioeconomic Panel (GSOEP) and the social insurance file (IAB) to study the effect of displacement on reemployment earnings of West German workers. On average, wages of the displaced decline only slightly upon reemployment. For workers in the IAB sample in 1986, we find that the lowest earnings quartile, in which displacement is concentrated, even gains slightly ( + 2%), while wage growth losses for the upper three quartiles are comparable with US evidence (-17%). Large wage losses are persistent and associated with changes of industry, but not of firm. A surprising finding is that displacement in Germany is often associated with later recall, in contrast to the North American experience. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification: 530: J63; J65.