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How much does a year off cost? Estimating the wage effects of employment breaks and part-time periods

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  • Beblo, Miriam
  • Wolf, Elke

Abstract

Discontinuities in the employment profile are supposed to cause wage cuts since they imply an interruption in the accumulation of human capital as well as a depreciation of the human capital stock built up in the past. In this paper, we estimate the return to effective experience, taking into account both the timing and the duration of non-work and part-time employment spells. Estimation results for German women suggest that deviations from full-time employment are associated with significant wage cuts owing to the depreciation of human capital. Postponing the discontinuity leads to a further fall of the wage rate. Controlling for individual heterogeneity with respect to industry sector and job position decreases the estimated depreciation rates. This we interpret as an indication for segregation in the labor market. We conclude that traditional wage estimations that do not control for depreciation underestimate the return to effective experience.

Suggested Citation

  • Beblo, Miriam & Wolf, Elke, 2000. "How much does a year off cost? Estimating the wage effects of employment breaks and part-time periods," ZEW Discussion Papers 00-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5351
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    Cited by:

    1. Gafni Dalit & Siniver Erez, 2015. "Is There a Motherhood Wage Penalty for Highly Skilled Women?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1353-1380, July.
    2. Görlich Dennis & Grip Andries de, 2007. "Human Capital Depreciation during Family-related Career Interruptions in Male and Female Occupations," ROA Research Memorandum 007, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    3. Jan Ondrich & Katharina C. Spieß & Qing Yang, 2002. "The Effect of Maternity Leave on Women's Pay in Germany 1984-1994," Discussion Papers of DIW Berlin 289, DIW Berlin, German Institute for Economic Research.
    4. Beblo, Miriam & Wolf, Elke, 2002. "Wage Penalties for Career Interruptions: An Empirical Analysis for West Germany," ZEW Discussion Papers 02-45, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Driouchi, Ahmed, 2015. "Threats to Skills of Unemployed Qualified Labor in Arab Economies," MPRA Paper 67361, University Library of Munich, Germany.
    6. Kuhlenkasper, Torben & Kauermann, Göran, 2010. "Female wage profiles: An additive mixed model approach to employment breaks due to childcare," HWWI Research Papers 2-18, Hamburg Institute of International Economics (HWWI).
    7. Driouchi, Ahmed, 2014. "Unemployment Persistence & Risks of Skill Obsolescence in Arab Countries," MPRA Paper 53793, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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