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Time out of Work and Skill Depreciation

  • Per-Anders Edin
  • Magnus Gustavsson

This paper investigates the role of skill depreciation in the relationship between work interruptions and subsequent wages. Using Swedish data from two waves (1994 and 1998) of the International Adult Literacy Survey, which included results of tests gauging respondents' ability to read and make practical use of printed information, the authors are able to analyze changes in individuals' skills as a function of time out of work. They find statistically strong evidence of a negative relationship between work interruptions and skills. The analysis suggests that depreciation of general skills was economically important. A full year of non-employment, for example, was associated with a 5-percentile move down the skill distribution.

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 61 (2008)
Issue (Month): 2 (January)
Pages: 163-180

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Handle: RePEc:ilr:articl:v:61:y:2008:i:2:p:163-180
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  1. Albrecht, James W. & Edin, Per-Anders & Sundström, Marianne & Vroman, Susan B., 1996. "Career Interruptions and Subsequent Earnings: A Reexamination Using Swedish Data," Working Paper Series 1996:23, Uppsala University, Department of Economics.
  2. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-80, October.
  3. Joshua Angrist & Alan Krueger, 1998. "Empirical Strategies in Labor Economics," Working papers 98-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Jonas Agell & Helge Bennmarker, 2002. "Wage Policy and Endogenous Wage Rigidity: A Representative View From the Inside," CESifo Working Paper Series 751, CESifo Group Munich.
  5. Robert Kaestner & Theodore Joyce & Hassan Wehbeh, 1996. "The Effect of Maternal Drug Use on Birth Weight: Measurement Error in Binary Variables," NBER Working Papers 5434, National Bureau of Economic Research, Inc.
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  7. Alan S. Blinder & Don H. Choi, 1989. "A Shred of Evidence on Theories of Wage Stickiness," NBER Working Papers 3105, National Bureau of Economic Research, Inc.
  8. Mincer, Jacob & Polachek, Solomon, 1974. "Family Investment in Human Capital: Earnings of Women," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S76-S108, Part II, .
  9. Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, February.
  10. Edin, P.-A. & Fredriksson, P., 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Papers 2000:19, Uppsala - Working Paper Series.
  11. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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  15. Dan Devroye & Richard B. Freeman, 2001. "Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries?," NBER Working Papers 8140, National Bureau of Economic Research, Inc.
  16. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
  17. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
  18. Eric A. Hanushek, 1979. "Conceptual and Empirical Issues in the Estimation of Educational Production Functions," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 351-388.
  19. Jacob Mincer & Solomon Polacheck, 1974. "Family Investments in Human Capital: Earnings of Women," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 397-431 National Bureau of Economic Research, Inc.
  20. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  21. David A Green & W Craig Riddell, . "Literacy, Numeracy and Labour Market Outcomes in Canada," Canadian International Labour Network Working Papers 47, McMaster University.
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