Human Capital Depreciation and Returns to Experience
American Economic Review
vol. 112,
no. 11, November 2022
(pp. 3725-62)
Abstract
Human capital can depreciate if skills are unused. But estimating human capital depreciation is challenging, as worker skills are difficult to measure and less productive workers are more likely to spend time in nonemployment. We overcome these challenges with new administrative data on teachers' assignments and their students' outcomes, and quasi-random variation from the teacher assignment process in Greece. We find significant losses to output, as a one-year increase in time without formal employment lowers students' test scores by 0.05 standard deviations. Using a simple production model, we estimate a skill depreciation rate of 4.3 percent and experience returns of 6.8 percent.Citation
Dinerstein, Michael, Rigissa Megalokonomou, and Constantine Yannelis. 2022. "Human Capital Depreciation and Returns to Experience." American Economic Review, 112 (11): 3725-62. DOI: 10.1257/aer.20201571Additional Materials
JEL Classification
- I21 Analysis of Education
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J45 Public Sector Labor Markets
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings