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Time Out of Work and Skill Depreciation

  • Edin, Per-Anders

    ()

    (Department of Economics)

  • Gustavsson, Magnus

    ()

    (Department of Economics)

This paper investigates the role of skill depreciation in the relationship between work interruptions and subsequent wages. Using a unique longitudinal dataset, the Swedish part of the International Adult Literacy Survey, we are able to analyze changes in literacy skills for individuals as a function of time out of work. In general, we find statistically strong evidence on a negative relationship between work interruptions and skills. Our analysis suggests that depreciation of general (literacy) skills is economically significant. Our estimates imply that a full year of non-employment is associated with skill losses that are equivalent to moving 5 percentiles down the skill distribution.

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File URL: http://www.nek.uu.se/pdf/wp2004_14.pdf
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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2004:14.

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Length: 29 pages
Date of creation: 28 Sep 2004
Date of revision:
Publication status: Published in Industrial and Labor Relations Review, 2008, pages 163-189.
Handle: RePEc:hhs:uunewp:2004_014
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  1. Gibbons, R. & Katz, L.F., 1989. "Layoffs And Lemons," Working papers 531, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. James W. Albrecht & Per-Anders Edin & Marianne Sundström & Susan B. Vroman, 1999. "Career Interruptions and Subsequent Earnings: A Reexamination Using Swedish Data," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 294-311.
  3. Jacob Mincer & Solomon Polachek, 1974. "Family Investments in Human Capital: Earnings of Women," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 76-110 National Bureau of Economic Research, Inc.
  4. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. 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.
  6. 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.
  7. Agell, Jonas & Bennmarker, Helge, 2002. "Wage policy and endogenous wage rigidity: a representative view from the inside," Working Paper Series 2002:12, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Francine D. Blau & Lawrence Kahn, 2004. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," CESifo Working Paper Series 1139, CESifo Group Munich.
  9. Kaestner, Robert & Joyce, Theodore & Wehbeh, Hassan, 1996. "The Effect of Maternal Drug Use on Birth Weight: Measurement Error in Binary Variables," Economic Inquiry, Western Economic Association International, vol. 34(4), pages 617-29, October.
  10. Dan Devroye & Richard Freeman, 2002. "Does Inequality in Skills Explain Inequality of Earnings Across Advanced Countries?," CEP Discussion Papers dp0552, Centre for Economic Performance, LSE.
  11. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, August.
  12. 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.
  13. Joshua Angrist & Alan Krueger, 1998. "Empirical Strategies in Labor Economics," Working papers 98-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Edin, P.-A. & Fredriksson, P., 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Papers 2000:19, Uppsala - Working Paper Series.
  15. Aigner, Dennis J., 1973. "Regression with a binary independent variable subject to errors of observation," Journal of Econometrics, Elsevier, vol. 1(1), pages 49-59, March.
  16. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  17. 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.
  18. 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.
  19. 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.
  20. David A Green & W Craig Riddell, . "Literacy, Numeracy and Labour Market Outcomes in Canada," Canadian International Labour Network Working Papers 47, McMaster University.
  21. Pissarides, C., 1990. "Unemployment And The Persistence On Employment Shocks," Papers 377, London School of Economics - Centre for Labour Economics.
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