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April 1995, Vol. 118, No. 4
John T. Addison, Douglas A. Fox, and Christopher J. Ruhm
W orkers who lose their jobs because of plant shutdowns or partial closings typically experience higher unemployment and greater wage losses than others whose employers do not go out of business or cut operations.
Dislocated workers are out of work, on average, an additional 8 weeks in the year their positions are terminated, and 4 weeks in the following calendar year. In addition, their wages remain lower: some 5 years later, their wages are at least 12 percent below those of their counterparts whose employers do not go out of business.1 Labor dislocation also leads to the loss of employer-provided health insurance for some workers, particularly those who subsequently have difficulty obtaining stable employment.2
Spurred by policy concerns and recent improvements in the availability of data on dislocated workers, economic research into the consequences of labor market displacement has proliferated.3 However, none of the previous studies has directly investigated the relationship between economic dislocation and the trade sensitivity of worker's industry. This gap in research is all the more surprising due to continuing controversy over the effects of measures liberalizing international trade.
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1 Christopher J. Ruhm, "Are Workers Permanently Scarred by Job Displacements?" American Economic Review, March 1991, pp.319-24.
2 Frances W. Horvath, "The pulse of economic change: displaced workers of 1981-85," Monthly Labor Review, June 1987, pp.3-12.
3 Among the most recent examples are John T. Addison and McKinley L. Blackburn, "Advance Notice and Job Search: More on the Value of an Early Start," forthcoming in Industrial Relations; William J. Carrington and Asad Zamad, "Interindustry Variation in the Costs of Job Displacement," Journal of Labor Economics, April 1994, pp. 243-75; Louis Jacobson, Robert LaLonde, and Daniel Sullivan, The Costs of Worker Dislocation (Kalamazoo, MI, W.E. Upjohn Institute for Employment Research, 1993); Christopher J. Ruhm, "Advance Notice, Job Search, and Postdisplacement Earnings," Journal of Labor Economics, January 1994, pp. 1-28; Paul L. Swaim and Michael J. Podgursky, "Female Labor Supply Following Job Displacement: A Split-Population Model of Labor Force Participation and Job Search," in Journal of Labor Economics, October 1994, pp. 640-56.
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