On the Benefits and Costs of Job Reallocation in Colombia

This article measures gross creation, destruction, and reallocation of jobs inside the Colombian Manufacturing Industry between 1982 and 1998. We characterize job reallocation as a source of adjustment both in productivity dynamics and on workers welfare. Consistent with previous research, we find evidence of productivity enhancing factor reallocation. However, we also find evidence of significant welfare losses for displaced workers. Our most novel results are the negative effect of displacement, sector change and unemployment duration on post-job-change wages. The event of sector change seems to spur considerable sector specific skills losses which offset any potential positive effects of sector change, such as the purge of the displacement stigma. In brief, our results show that on balance depreciation and stigma effects dominate productive search outcomes in the determination of post-unemployment wages. We conclude that at least a fraction of job reallocation is socially inefficient.