Specific Human Capital and Wait Unemployment

Benedikt Herz

Journal of Labor Economics, 2019, vol. 37, issue 2, 467 - 508

Abstract: A displaced worker might rationally prefer to wait through a long spell of unemployment instead of seeking employment at a lower wage in a job he is not trained for. I evaluate this trade-off using micro data on displaced workers. To achieve identification, I exploit the fact that the more a worker has invested in occupation-specific human capital, the more costly it is for him to switch occupations and therefore the higher is his incentive to wait. I find that between 9% and 17% of total unemployment in the United States can be attributed to wait unemployment.

Date: 2019
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