Essays on Earnings Losses and Human Capital Accumulation

Abstract

This dissertation investigates earnings losses following a job displacement and human capital accumulation. Chapter 1 extends the job displacement literature by documenting several new empirical findings about how earnings losses vary over the life cycle. In particular, I show that earnings losses are increasing in the age at the time of the job displacement and that the earnings recovery flattens out earlier for older displaced workers. To account for these empirical patterns, I propose a Ben-Porath model with two novel features. First, I expose the workers to job displacement shocks that lead to unemployment spells. Second, I allow workers to accumulate two types of human capital over their life cycle: general and specific. Specific human capital is lost when a worker experiences a displacement. I calibrate the model to match salient features of life cycle earnings and employment dynamics and show that the model can generate the large differences in earnings losses over the life cycle, as well as the shape of employment losses following a job displacement. Chapter 2 considers the extent of heterogeneity in the estimated earnings losses associated with job displacements. I explore the ability of several factors to statistically explain the heterogeneity in persistent earnings losses across individuals. I find that age at the time of displacement, the immediate wage change upon reemployment, and educational attainment account for most of the variation in the estimated earnings losses. I leverage the richness of the dataset and partition the displaced worker sample along several dimensions to estimate earnings and employment losses. Chapter 3 documents motivating evidence about the occupation-specificity of human capital and develops a simple framework that is able to match certain patterns in the data about occupation switchers and stayers. The framework allows individuals to transfer their human capital within an occupation. However, when they switch occupations, they must start the accumulation of specific human capital over again. This simple decision-theoretic framework is able to generate patterns and differences between occupation switchers and stayers.