Are Workers Permanently Scarred by Job Displacements

Abstract

This paper investigates whether workers suffer lasting scars following job displacements. Using David T. Ellwood's (1982) terminology, scars represent persistent effects, whereas blemishes are transitory adjustments which dissipate over time. More precisely, dislocated individuals are defined as scarred if they continue to earn less or to be unemployed more than their nondisplaced counterparts, even after the conclusion of a several-year adjustment period