Human Capital Depreciation and Returns to Experience
Michael Dinerstein, Rigissa Megalokonomou, Constantine Yannelis
American Economic Review · 2022 · Volume 112 · Issue 11
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.
Keywords
Analysis of Education, Human Capital, Skills, Occupational Choice, Labor Productivity, Public Sector Labor Markets, Unemployment: Models, Duration, Incidence, and Job Search, Unemployment Insurance, Severance Pay, Plant Closings
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