Job Loss and Occupational Job Security: Evidence from Post-Displacement Sorting

Existing research on the cost of job loss has often overlooked the role of job sorting following displacement in contributing to recursive unemployment. This study estimates the effect of displacement on the job security associated with the occupations matched by displaced workers following dismissal. Using a dataset containing the employment histories of approximately four million individuals working in Italy, which allows for disentangling voluntary from involuntary job moves, I construct two sector-specific occupational indicators of job security that I attach to each employment spell: one capturing the risk of dismissal and the other conveying a measure of expected tenure. Then, employing an identification strategy that exploits collective dismissals as exogenous variations and the staggered treatment timing at which they occur, I find that displacement leads to an increase in the risk of dismissal inherent to post-displacement occupations of about 2.36 percentage points and a lower expected tenure of around 155 days. These effects correspond to an approximately 12-to-13% decline in job security relative to pre-displacement averages.