The Collapse of Human Capital Ladders in Recessions

Edoardo Maria Acabbi, Andrea Alati and Luca Mazzone

Papers from arXiv.org

Abstract: Using administrative data, we document that workers acquire more human capital at more productive firms. Recessions distort workers-firm sorting, flatten the job ladder and impact human capital accumulation, as workers match on average to worse firms. To quantify the aggregate relevance of these effects, we build a directed search model with aggregate risk and worker-firm heterogeneity, in which human capital accumulation depends on firm quality. We estimate the model and show that recessions have persistent negative effects on the productivity of worker-firm matches, with distortions in sorting and human capital accumulation accounting for approximately 35% of cumulative output losses.

Date: 2026-07
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