The Cost of Human Capital Depreciation during Unemployment

Lien Laureys

No 1420, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: Skill erosion during unemployment was of particular concern as unemployment duration increased in the Great Recession. I argue that it generates an externality in job creation: firms ignore how their hiring decisions affect the unemployment pool’s skill composition, and hence the expected output produced by new hires. As a consequence, job creation is too low from a social point of view. But the extent to which it is too low varies over the cycle. This is because the externality’s magnitude, which depends on the impact of job creation on the pool’s skill composition, reduces when the share of unemployed workers who already have eroded skills increases.

Pages: 60 pages
Date: 2014-07
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (16)

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http://www.centreformacroeconomics.ac.uk/Discussio ... MDP2014-20-Paper.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: The Cost of Human Capital Depreciation During Unemployment (2021)
Working Paper: The cost of human capital depreciation during unemployment (2014)
Working Paper: The cost of human capital depreciation during unemployment (2014)
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