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Changing Tracks: Human Capital Investment after Loss of Ability

Author

Listed:
  • Anders Humlum
  • Jakob R. Munch
  • Pernille Plato

Abstract

We provide the first evidence on how workers invest in human capital after losing ability. Using quasi-random work accidents in Danish administrative data, we find that workers enroll in bachelor's programs after physical injuries, pursuing degrees that build on their past training and experience. Exploiting institutional differences in the stackability of degrees, we find that higher education moves injured workers from disability benefits to full-time employment, earning 25 percent more than before injury. Reskilling subsidies for injured workers pay for themselves four times over, and current rates of reskilling are substantially below the social optimum, especially for middle-aged workers.

Suggested Citation

  • Anders Humlum & Jakob R. Munch & Pernille Plato, 2025. "Changing Tracks: Human Capital Investment after Loss of Ability," American Economic Review, American Economic Association, vol. 115(5), pages 1520-1554, May.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:5:p:1520-54
    DOI: 10.1257/aer.20231067
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    More about this item

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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