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Skill Depreciation during Unemployment: Evidence from Panel Data

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  • Jonathan Cohen
  • Andrew C. Johnston
  • Attila Lindner

Abstract

We examine the depreciation of skills among unemployed German workers using a panel of skill measures linked to administrative data. Both the reemployment hazard and reemployment earnings steadily decline with unemployment duration. Indicators of depression and loneliness also rise substantially. However, we find no decline in a wide range of cognitive and noncognitive skills while workers remain unemployed. We find the same pattern in a panel of American workers. The results imply that skill depreciation in general human capital is unlikely to be a major explanation for observed duration dependence in reemployment outcomes.

Suggested Citation

  • Jonathan Cohen & Andrew C. Johnston & Attila Lindner, 2025. "Skill Depreciation during Unemployment: Evidence from Panel Data," American Economic Journal: Applied Economics, American Economic Association, vol. 17(3), pages 208-235, July.
    • Handle: RePEc:aea:aejapp:v:17:y:2025:i:3:p:208-35
    DOI: 10.1257/app.20230195
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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