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Human Capital Depreciation and Returns to Experience

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  • Michael Dinerstein
  • Rigissa Megalokonomou
  • Constantine Yannelis

Abstract

Human capital can depreciate if skills are unused. But estimating human capital depreciation is challenging, as worker skills are difficult to measure and less productive workers are more likely to spend time in non-employment. We overcome these challenges with new administrative data on teachers’ assignments and their students’ outcomes, and quasi-random variation from the teacher assignment process in Greece. We find significant losses to output, as a one-year increase in time without formal employment lowers students’ test scores by 0.05 standard deviations. Using a simple production model, we estimate a skill depreciation rate of 4.3% and experience returns of 6.8%.

Suggested Citation

  • Michael Dinerstein & Rigissa Megalokonomou & Constantine Yannelis, 2020. "Human Capital Depreciation and Returns to Experience," NBER Working Papers 27925, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27925
    Note: ED EFG LS PE PR
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    References listed on IDEAS

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    1. Tsakloglou, Panos & Cholezas, Ioannis, 2005. "Education and Inequality in Greece," IZA Discussion Papers 1582, Institute of Labor Economics (IZA).
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    More about this item

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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