The wage effects of subsidized career breaks

Oskar Skans and Linus Liljeberg ()

Empirical Economics, 2014, vol. 47, issue 2, 593-617

Abstract: This article studies how subsidized career breaks affect future labor market performance. The analysis uses a Swedish career break program where applications were accepted until local funds were exhausted. The rejected applicants serve as counterfactuals to derive estimates that are unaffected by selection or omitted variables. The estimated wage effect of a 10-month-long break is negative and in the order of 3 % 1–2 years after the interruption. The average applicant is estimated to have substantially lower returns to experience than the average worker. The results thus show that career breaks are costly, even for groups with low expected returns to experience, and in an environment with very compressed wages. The career breaks also induced an increase in job and task mobility whereas post-leave labor supply remained unaffected except for workers close to retirement. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Career interruptions; Wages; Experience; Job mobility; J31; J22; J24; J26 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s00181-013-0757-7

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