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Loss of Skill during Unemployment and TFP Differences across Countries

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  • Victor Ortego-Marti

    (Department of Economics, University of California Riverside)

Abstract

In an economy with search and matching frictions in which workers lose human capital during unemployment, TFP becomes endogenous and depends on workers’ unemployment history. Using available estimates of labor market flows for a sample of OECD countries, this paper quantifies the amount of TFP differences due to skill losses during unemployment. Continental European countries, with their low job finding rates, exhibit the lowest TFPs. Nordic countries and Japan display the highest levels of TFP due to their high job finding rate relative to the separation rate. TFP in Anglo-Saxon countries stands in-between the two groups. The paper further studies the effect of hiring subsidies on the labor market and TFP.

Suggested Citation

  • Victor Ortego-Marti, 2015. "Loss of Skill during Unemployment and TFP Differences across Countries," Working Papers 201513, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:201513
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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