The Distributional Impacts of Worker Reallocation: Evidence from Europe

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Series Details WP/22/124, Number 124
Publication Date June 2022
ISBN 9798400212512
ISSN 1018-5941
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Using individual-level data for 30 European countries between 1983 and 2019, we document the extent and earning consequences of workers’ reallocation across occupations and industries and how these outcomes vary with individual-level characteristics, namely (i) education, (ii) gender, and (iii) age.

We find that while young workers are more likely to experience earnings gains with on-the-job sectoral and occupational switches, low-skilled workers’ employment transitions are associated with an earnings loss. These differences in earnings gains and losses also mask a high degree of heterogeneity related to trends in routinization. We find that workers, particularly low-skilled and older workers during recessions, experience a severe earning penalty when switching occupations from non-routine to routine occupations.

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