JESS Seminar: Involuntary Unemployment, Wages and the Signaling Effect of Interim Jobs

I use a novel approach to decompose the long-term effect of an involuntary job loss on wages into a signaling effect, arising from taking up low-level interim jobs immediately after displacement, and a channel accounting for all other factors along the wage distribution. My results show that holding an interim job has a negative effect on long-term wages over the entire range of the distribution. The estimates reveal considerable heterogeneity with individuals at the top and bottom of the distribution relatively more affected. Assessing the sensitivity of my results, I show that they are robust to specific failures of the identifying assumptions.