Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2005:21: Time out of work and skill depreciation

Per-Anders Edin () and Magnus Gustavsson ()
Additional contact information
Per-Anders Edin: IFAU - Institute for Labour Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Magnus Gustavsson: Department of Economics , Uppsala University, Postal: P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper investigates the role of skill depreciation in the relationship between work interruptions and subsequent wages. Using unique longitudinal microdata containing information on the ability to understand and practically employ printed information, we are able to analyze changes in skills for individuals as a function of time out of work. In general, we find statistically strong evidence of a negative relationship between work interruptions and skills. Our analysis suggests that depreciation of general information-processing skills is economically significant, with a full year of non-employment being equivalent to moving 5 percentiles down the skill distribution.

Keywords: Work interruptions; skill depreciation; wage differentials

JEL-codes: J24; J31

35 pages, September 1, 2005

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