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Do re-employment wages fall due to the depreciation of human capital or employer perceptions?

Author

Listed:
  • Heather L.R. Tierney

    (Purdue University-Fort Wayne)

  • Zafar Nazarov

    (Purdue University-Fort Wayne)

  • Nodir Adilov

    (Purdue University-Fort Wayne)

Abstract

Using the data from the Survey of Income and Program Participation (SIPP) between 1996 and 2013, this study estimates the effect of unemployment duration on wages for workers between ages 25 and 64. The empirical strategy assumes a joint estimation of the job search and reemployment wage processes. The study also assumes the decomposition strategy of this effect into the human capital depreciation and stigma effects with the stigma effect refering to employers' perception that workers with longer duration of unemployment have lower productivity as compared to workers with shorter duration of unemployment. The results imply a substantial decline in the unemployment duration effect in the joint model relative to the OLS model. The main conclusion is that unemployment scarring can be mainly explained by differences in individual unobserved traits and to a lesser extent by human capital depreciation

Suggested Citation

  • Heather L.R. Tierney & Zafar Nazarov & Nodir Adilov, 2019. "Do re-employment wages fall due to the depreciation of human capital or employer perceptions?," Economics Bulletin, AccessEcon, vol. 39(4), pages 2857-2864.
    • Handle: RePEc:ebl:ecbull:eb-19-00411
    as

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    References listed on IDEAS

    as
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    3. Ben Lockwood, 1991. "Information Externalities in the Labour Market and the Duration of Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(4), pages 733-753.
    4. Gregory, Mary & Jukes, Robert, 2001. "Unemployment and Subsequent Earnings: Estimating Scarring among British Men 1984-94," Economic Journal, Royal Economic Society, vol. 111(475), pages 607-625, November.
    5. Arulampalam, Wiji, 2001. "Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages," Economic Journal, Royal Economic Society, vol. 111(475), pages 585-606, November.
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    8. Vishwanath, Tara, 1989. "Job Search, Stigma Effect, and Escape Rate from Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 487-502, October.
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    Keywords

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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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