What is it about?

Do workers cope with job dismissal by commuting farther away and/or by moving to jobs? Using administrative data from Statistics Netherlands, we analyse how workers respond to job loss following firm bankruptcy. We examine (i) the job loss effects on employment, hourly wages, commuting distance and changing home, and (ii) the role of workers’ housing state in these effects. We define the worker’s housing state as being a tenant or owner-occupier, where owner-occupiers are classified in five different groups based on the loan-to-value ratio on their home.

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Why is it important?

The results show that dismissed workers experience besides substantial losses in employment and wages also large increases in the commuting distance. Interestingly, the results suggest that workers who are longer unemployed prefer working closer to home over higher wages. After a job loss, moving home appears irrelevant as a margin of labour adjustment. Moreover, we find that dismissed leveraged owners, compared with tenants and outright owners, are more rapidly re-employed and experience a smaller increase in the commuting distance but also a higher loss in wage. This research is relevant for policies that aim to limit the impact of negative employment shocks, as it provides a better understanding of how workers respond to job loss.

Perspectives

The findings suggest that for workers who lose their job, the commuting margin is a more relevant margin of labour adjustment than the changing home margin. Moreover, the results suggest that financial incentive structures drive leveraged displaced owners to prefer rapid re-employment over more modest wage losses.

Dr Jordy Meekes
Universiteit Leiden

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This page is a summary of: The role of the housing market in workers′ resilience to job displacement after firm bankruptcy, Journal of Urban Economics, January 2019, Elsevier, DOI: 10.1016/j.jue.2018.11.005.
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