Earnings Losses and Unemployment of Displaced Workers in Germany

Data from the German Socio-Economic Panel are used to examine the experiences of German workers following job displacement due to plant closure. In the year of displacement, annual earnings declined by about 13.5%, and the typical worker experienced between 6 and 10 additional days of annual unemployment. Two years later, annual earnings were only 6.5% less than before displacement, and the largest estimated increase in annual unemployment was 4 days. These estimated effects lie near the lower end of the range of similar estimates for U.S. workers.