Explaining Individual Job Separations in a Segregated Labor Market

Abstract

In this paper, individual job separations are analyzed using employer-employee data. The analysis is conducted within the framework of a simple theoretical model in which the value of the match between the worker and the firm is a function of the individual component and the firm component. This partition is important in an empirical context because of labor market segregation. In particular, we argue that failure to account for both the individual and the firm component simultaneously produce incorrect conclusions. One example is that in conventional studies, where only the individual component is included, women will have higher separation probabilities than men. However, when we take into account that women work in small low-paying firms, this result vanishes. To further investigate employment stability, information on the labor market states subsequent to a job separation is introduced. This additional information reveal that the population of currently working women relative to men is more likely to separate from a job, become unemployed, and leave the labor market because of less attractive match characteristics. A decomposition reveals that 25 percent of the gender stability gap is due to differences in the individual components and the remaining 75 percent can be attributed to differences in the firm component.