Abstract

In this project, we assess the long-term costs of the massive job displacement in the German coal industry by studying three questions. First, how large and persistent are the employment and wage losses for the displaced workers? These direct costs depend on both worker-specific unemployment durations and any long-run earnings changes associated with the reallocation to different industries and/or locations. Second, how do local economies adjust to the large-scale layoffs and have they suffered from spillover effects, multiplying job losses? Such indirect costs could occur through local multiplier effects (e.g. lower demand for local goods) or agglomeration economies (e.g. input-output linkages). Despite longstanding interest in these questions, evidence on the costs and incidence of labor market adjustment in areas of chronic industrial decline remains scarce, largely because the data demands for a credible identification are high. Third, how do former and current workers of the German coal industry adapt to the structural changes in terms of occupational and geographical mobility?