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The Hedgehog’s curse: Knowledge specialization and displacement loss

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  • Hernandez Martinez, Victor
  • Holter, Hans A.
  • Pinheiro, Roberto

Abstract

This paper studies the impact of knowledge specialization on earnings losses following displacement. We develop a novel measure of human capital specialization based on the share of knowledge areas that are irrelevant for an occupation. Combining our measure with individual labor histories from the NLSY, we show that workers with human capital specialization one standard deviation larger than average suffer earnings losses 4.8 percentage points larger than average per year following exogenous displacement. A longer average duration of non-employment spells and occupational downgrading are the two mechanisms that explain the negative effect of specialization on post-displacement earnings.

Suggested Citation

  • Hernandez Martinez, Victor & Holter, Hans A. & Pinheiro, Roberto, 2025. "The Hedgehog’s curse: Knowledge specialization and displacement loss," Labour Economics, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:labeco:v:97:y:2025:i:c:s0927537125000934
    DOI: 10.1016/j.labeco.2025.102769
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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