Motu Working Paper 23-12 - Job displacement and local employment density

7 Job displacement and local employment density Instead, we are most interested in the effects of employment density or other measures of job prospects on the outcomes of displaced workers, and thus estimate these effects relative to the mean outcomes of the displaced workers. [...] In the panel data context, we allow the effects of the local labour market conditions to vary before and after layoff, and the coefficient 𝛿1, capturing the relative post-layoff effect, is the main parameter of interest. [...] 10 Job displacement and local employment density 4.2 Local job prospects We measure local employment density in two related ways, the first capturing the density of total employment, and the second providing a worker-specific measure that reflects the prevalence of the sort of jobs that the worker is most likely to work in. [...] Adjusting for the counterfactual expected post-layoff increase in earnings, the adjusted decline in earnings is greater than the raw decline.26 For example, compared to earnings in the month prior to layoff, average earnings are about 11% lower 6 months after layoff and about the same as pre-layoff after 3 years; in contrast, adjusting for the counterfactual growth in the absence of layoff, earnin. [...] In contrast to the predictions of the spatial mismatch hypothesis, the employment rate patterns in Figure 2(a) show that the re-employment rates of displaced workers in the larger urban areas (especially Auckland and Wellington) are lower than in smaller areas with lower employment density.