The value of specific skills under shock: High risks and high returns

Abstract

We study the causal effects of negative and positive demand shocks on the returns to specific skills by using variation from international trade shocks. To measure specific skills, we use task information from an official data set for career guidance and merge this information with a large register data set. Our results show that negative demand shocks result in larger earnings losses for workers with specific skills than for those with general skills, but workers with specific skills also profit much more from positive demand shocks. Thus, demand shocks lead to risk-return trade-offs for workers with specific skills.