Human Capital Depreciation and Returns to Experience

Michael Dinerstein, Rigissa Megalokonomou and Constantine Yannelis

American Economic Review, 2022, vol. 112, issue 11, 3725-62

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 nonemployment. 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 percent and experience returns of 6.8 percent.

JEL-codes: I21 J24 J45 J64 J65 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (21)

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DOI: 10.1257/aer.20201571

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