Wage Losses of Displaced Workers in France and the US ? Theory and Comparative Evidence PRELIMINARY

This paper develops a theoretical search framework to analyse the wage losses experienced by displaced workers. We underline the importance of accounting for two different sources of wage losses whose consequences might differ, namely the loss of rents earned on their predisplacement job and the loss of accumulated firm-specific human capital. We then turn to the measurement and decomposition of wage losses in France and the US using micro data from labor force surveys. We show that while the order of magnitude of wage losses ar comparable in the two economies (10 to 15%), the sources of wage adjustment differ strongly: all of the wage decline in France seems to be due to the loss of accumulated firm specific earning potential, while in the US case, they only account for half of the total wage adjustment. ∗∗ I thank Orley Ashenfelter, Daniel Cohen, Hank Farber, Alan Krueger, Gilles SaintPaul, as well as labor seminar participants at Princeton University for useful comments and remarks.