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© 2022 International Monetary Fund
WP/22/124
IMF Working Paper
Research Department
The Distributional Impacts of Worker Reallocation: Evidence from Europe
Prepared by John Bluedorn, Francesca Caselli, Niels-Jakob Hansen, Ippei Shibata, and Marina M. Tavares*
Authorized for distribution by Malhar Nabar
June 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: 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.
RECOMMENDED CITATION: Bluedorn, John, Francesca Caselli, Niels-Jakob Hansen, Ippei Shibata, and Marina M. Tavares. 2022. “The Distributional Impacts of Worker Reallocation: Evidence from Europe.” IMF Working Paper 22/124.
| JEL Classification Numbers: | E32, J62, J63, P52 |
| Keywords: | Labor market mobility, Job transitions, Occupational mobility, Routinization, Business cycles |
| Author’s E-Mail Address: | JBluedorn@imf.org; FCaselli@imf.org; NHansen@imf.org; IShibata@imf.org; MMendesTavares@imf.org |
| JEL Classification Numbers: | E32, J62, J63, P52 |
| Keywords: | Labor market mobility, Job transitions, Occupational mobility, Routinization, Business cycles |
| Author’s E-Mail Address: | JBluedorn@imf.org; FCaselli@imf.org; NHansen@imf.org; IShibata@imf.org; MMendesTavares@imf.org |
Title Page
WORKING PAPERS
The Distributional Impacts of Worker Reallocation: Evidence from Europe
Prepared by John Bluedorn, Francesca Caselli, Niels-Jakob Hansen, Ippei Shibata, and Marina M. Tavares1
Contents
I. Introduction
II. Data
2.1 Measuring the incidence and earnings consequences of worker reallocation
III. The extent, consequences, and cyclicality of career changes
3.1 Long-run likelihoods and earnings consequences of career changes
3.2 Cyclical fluctuations
IV. Career changes: why, who, where, and at what wage gains?
4.1 Who changes careers?
4.2 Who experiences earnings gains and losses?
V. The role of routinization
5.1 Aggregate Level of Trend and Cyclicality of Routine Jobs
5.2 Transitions between Routine and Non-Routine Jobs
5.3 Earning Consequences in relation to Routine Jobs
5.4 Earning Consequences Across Demographic Groups in relation to Routine Jobs
VI. Conclusion
References
FIGURES
Figure 1: Average Employment Share of Routine Jobs (percent)
Figure 2: Average Net Hiring Rates Across the Business Cycle (average economy-wide rate, percent)
TABLES
Table 1. Long-term average sectoral and occupational transitions: probability and
Table 2. Sectoral and occupation transition probabilities during the business cycle
Table 3. Earning consequences of occupation transitions during the business cycle
Table 4. Impact of recessions and heterogeneity by individual level characteristics for sectoral
Table 5. Impact of recessions and heterogeneity by individual level characteristics for occupational
Table 6. Earning consequences of occupational switches and heterogeneity
Table 7. Transition matrix for occupational switches
Table 8. Sectoral switches and routine jobs
Table 9. Occupational switches and routine jobs
Table 10. Earning Changes and Routine Occupations
Table 11. Earning Changes and Routine Occupations: Demographics
International Monetary Fund Research Department. 700 19th St NW, Washington, DC 20431, USA. Corresponding author is ishibata@imf.org.
We thank Tito Boeri, Malhar Nabar, Romain Duval, Jean-Jacques Hallaert, Nir Klein, Ana Lariau, and seminar participants at the IMF for useful comments and suggestions. We also thank Youyou Huang, Yi Ji, and Cynthia Nyakeri for excellent research assistance. The views expressed in this Working Paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.