Human Capital and Unemployment Dynamics: Why More Educated Workers Enjoy Greater Employment Stability

Isabel Cairó and Tomaz Cajner

Economic Journal, 2018, vol. 128, issue 609, 652-682

Abstract: Why do more educated workers experience lower unemployment rates and lower employment volatility? Empirically, these workers have similar job finding rates but much lower and less volatile separation rates than their less educated peers. We argue that on†the†job training, being complementary to formal education, is the reason for this pattern. Using a search and matching model with endogenous separations, we show that investments in match†specific human capital reduce incentives to separate but leave the job finding rate essentially unaffected. The model generates unemployment dynamics quantitatively consistent with the data. Finally, we provide novel empirical evidence supporting the mechanism studied in the article.

Date: 2018
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https://doi.org/10.1111/ecoj.12441

Related works:
Working Paper: Human Capital and Unemployment Dynamics: Why More Educated Workers Enjoy Greater Employment Stability (2014)
Working Paper: Human Capital and Unemployment Dynamics: Why More Educated Workers Enjoy Greater Employment Stability (2011)
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