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

Miriam Beblo and Elke Wolf

No 00-69, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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.

JEL-codes: J24 J31 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:5351

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