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Heather L.R. Tierney, Zafar Nazarov and Nodir Adilov
''Do re-employment wages fall due to the depreciation of human capital or employer perceptions?''
( 2019, Vol. 39 No.4 )
Using the data from the Survey of Income and Program Participation (SIPP) between 1996 and 2013, this study estimates the effect of unemployment duration on wages for workers between ages 25 and 64. The empirical strategy assumes a joint estimation of the job search and reemployment wage processes. The study also assumes the decomposition strategy of this effect into the human capital depreciation and stigma effects with the stigma effect refering to employers' perception that workers with longer duration of unemployment have lower productivity as compared to workers with shorter duration of unemployment. The results imply a substantial decline in the unemployment duration effect in the joint model relative to the OLS model. The main conclusion is that unemployment scarring can be mainly explained by differences in individual unobserved traits and to a lesser extent by human capital depreciation
Keywords: Duration of Unemployment; Re-employment Wages; Unemployment Stigma; Skills Depreciation; Unemployment Scarring.
JEL: J3 - Wages, Compensation, and Labor Costs: General
J6 - Mobility, Unemployment, and Vacancies: General
Manuscript Received : Apr 30 2019 Manuscript Accepted : Dec 11 2019

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