Human Capital Depreciation Research Articles

Parental leave and careers: Women’s and men’s wages after parental leave in Sweden

Abstract Persistent gender differences in caretaking and the parental leave length have been proposed as one important reason why the gender wage and income gap has remained stable in Sweden for a long period of time. In this article, we study whether and how parental leave uptake (PL) affects mothers’ and fathers’ earned income and wages during a period of up to eight years after the first child is born. Focusing on those who had their first child in 1999, the descriptive results based on Swedish population registers show that social transfers compensate for a large part of the loss in earned income for mothers. Multivariate analyses of fixed effect models indicate small wage effects of PL. PL results in greater wage reductions (or the loss of wage increases) for the higher educated than for others. For women, the longer their leaves are, the more their wages suffer. For men, the negative wage effect is more immediate but increases less with time in parental leave, which leads to the conclusion that human capital depreciation most likely is not the main reason for the wage decreases that fathers experience. Instead, it seems that men’s leave taking is perceived as a signal of work commitment by employers, given that the negative wage effect appears already at very short leaves.

Exploring of the Human Capital Depreciation of Ukrainian Labor Migrants Abroad: Results of a Survey

The article presents the Model of Human Capital depreciation of labor migrants abroad and the depreciation of the existing amount of Human Capital of labor migrants in host countries.The research also presents results of the survey, conducted in the Ternopil region of Ukraine among ex-labor migrants and children of labor migrants, which confirmed the Human Capital depreciation of Ukrainian labor migrants abroad.The study also shows an example of computation of the Human Capital depreciation of a skilled worker who works as a labor migrant in a host country, and for this example uses the Human Capital depreciation rate by Spanish scientists M. Arrazola and J. Hevia.

Layoff Orders and Occupational Mobility Via Unemployment

This paper examines how a change in layoff order can affect the decomposition and the size of unemployment in an equilibrium model where workers make optimal occupational reallocation decisions. In a calibrated model, a policy that concentrates involuntary unemployment incidences to inexperienced workers decreases workers' incentives to reallocate, compared to an equilibrium where everyone faces an identical unemployment risk, leading also to a decrease in aggregate unemployment. Moreover, given that the human capital depreciation during unemployment spells is strong, this policy change increases the market output and on average does not harm inexperienced workers.

Female labour market outcomes and the impact of maternity leave policies

Abstract This paper shows how family policies aimed at reconciling the pressures of family and work generate substantial variation in labour market outcomes across developed countries. We use a life-cycle model of female labour supply and savings behaviour, calibrated to the US economy, to assess the effect of introducing to the US a maternity leave policy similar to Scandinavian-type policies. We focus on the impact on gender differences in participation and in wages. We distinguish between the effect of the job protection offered by maternity leave and the effect of income replacement. Job protection leads to substantial increases in participation of mothers with children under 6, but with little long term effects. The effects on wages are minimal, with negative selection effects offsetting the reduced human capital depreciation. Income replacement has a limited impact on participation or wages. JEL codes: J13; J18; J22

An adjustment cost model of social mobility

We analyze herein the effects of the human capital adjustment cost on social mobility. Such an adjustment cost is modeled as a rising marginal cost schedule for augmenting human capital. We use a general human capital technology, which disentangles the adjustment cost from the depreciation cost of the human capital. Missing credit markets prevent individuals from equalizing the initial differences in the human capital. We find that a higher adjustment cost for human capital acquisition slows down the social mobility and results in a persistent inequality across generations. On the other hand, a higher rate of human capital depreciation could increase mobility via a positive effect on new investment. The quantitative analysis of our model suggests that the human capital adjustment cost is nontrivial to account for the observed persistence of inequality and social mobility. In addition, we find that the government redistribution policy could account for the large observed variation in estimates of social mobility.

Telework as a form of limiting human and social capital depreciation among parents with young children

The main goal of the article is to present telework as a form of employment for parents with young children and its evaluation in the context of methods counteracting the depreciation of human and social capital – both from the labour demand and labour supply perspectives. The paper consists of two parts: a theoretical perspective and a practical one. The first part of the paper begins with a reflection on the phenomena of the depreciation of human and social capital in the light of literature review, especially with reference to the situation of parents raising young children. In the following – more practical – section, the concept and types of telework are introduced as well as its advantages and disadvantages from the points of view of employers and employees.

Unemployment scarring by gender: Human capital depreciation or stigmatization? Longitudinal evidence from the Netherlands, 1980–2000

Using longitudinal data from the Dutch Labor Force Supply Panel (OSA), this article examines how unemployment scarring (i.e., wage setbacks following unemployment) and its underlying mechanisms operate across gender in the Netherlands over the period 1985–2000. A series of fixed effect panel models that correct for unobserved heterogeneity, reveal a notable disparity in unemployment scarring by gender. Interestingly, while unemployment scarring is short-lived and partly conditional upon human capital differences among women, it is strongly persistent among men and contingent upon old age, ethnicity, and tight economic conditions. Our findings provide new evidence regarding unemployment scarring by gender while they support the hypothesis that among women the effects of unemployment scarring are predominantly driven by human capital depreciation, while among men stigma effects dominate.

Optimal Monetary Policy in the Presence of Human Capital Depreciation During Unemployment

When workers are exposed to human capital depreciation during periods of unemployment, hiring affects the unemployment pool's composition in terms of skills, and hence the economy's production potential. Introducing human capital de- preciation during unemployment into an otherwise standard New Keynesian model with search frictions in the labour market leads to the finding that the flexible price allocation is no longer constrained-efficient even when the standard Hosios condi- tion holds. This is because it generates a composition externality in job creation: firms ignore how their hiring decisions affect the extent to which the unemployed workers' skills erode, and hence the output that can be produced by new matches. Consequently, it might be desirable from a social point of view for monetary policy to deviate from strict inflation targeting. But quantitative analysis shows that al- though optimal price inflation is no longer zero, strict inflation targeting stays close to the optimal policy.

The nature of surgeon human capital depreciation

To test how practice interruptions affect worker productivity, we estimate how temporal breaks affect surgeons’ performance of coronary artery bypass grafting (CABG). Examining 188 surgeons who performed 56,315 CABG surgeries in Pennsylvania between 2006 and 2010, we find that a surgeon's additional day away from the operating room raised patients’ inpatient mortality by up to 0.067 percentage points (2.4% relative effect) but reduced total hospitalization costs by up to 0.59 percentage points. Among emergent patients treated by high-volume providers, where temporal distance is most plausibly exogenous, an additional day away raised mortality risk by 0.398 percentage points (11.4% relative effect) but reduced cost by up to 1.4 percentage points. This is consistent with the hypothesis that as temporal distance increases, surgeons are less likely to recognize and address life-threatening complications. Our estimates imply additional intraprocedural treatment intensity has a cost per life-year preserved of $7871–18,500, well within conventional cost-effectiveness cutoffs.

Human capital depreciation and education level

Purpose– The purpose of this paper is to investigate the link between human capital depreciation and education level, with an emphasis on potential differences between general and specific education.Design/methodology/approach– A nonlinear wage equation, based on Arrazola and de Hevia's (2004) model, is estimated using data from the Swiss Labor Force Survey (SLFS) over the period 1998-2008, in order to estimate a human capital depreciation rate for several education groups.Findings– Human capital depreciation is significantly related to education type. Academic (“concept-based”) education protects workers more effectively against depreciation than vocational (“skill-specific”) education.Research limitations/implications– The SLFS survey is a rotating panel of five years and no retrospective data on earnings and employment are provided. A study of lifecycle earnings like the one proposed here would clearly benefit from a longer individual observation period.Practical implications– In all educational tracks, even vocational ones, a substantial time share should be devoted to the acquisition of general skills. Moreover, it is necessary to manage lifelong learning carefully in order not to waste initial investments in education.Originality/value– Instead of using a purely quantitative approach to separate workers by years of education, qualitative aspects of educational system are taken into account. Taking advantage of the Swiss educational system characteristics, workers are separated on the basis of their education type. Workers with vocational education (apprenticeships, professional and technical schools and universities of applied sciences) are assumed to possess a relatively specific human capital, compared to those with academic education (high schools and universities).

The Cost of Human Capital Depreciation During Unemployment

Skill erosion during unemployment was of particular concern as unemployment duration increased in the Great Recession. I argue that it generates an externality in job creation: firms ignore how their hiring decisions affect the unemployment pool’s skill composition, and hence the output produced by other firms' new hires. As a consequence, job creation is too low from a social point of view. But the extent to which it is too low varies over the cycle. This is because the externality’s magnitude, which depends on the impact of job creation on the pool’s skill composition, reduces when the share of unemployed workers who already have eroded skills increases.

Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers

SummaryThis study investigates whether and to what extent further unemployment experience for youths who are already long term unemployed imposes a penalty on subsequent labour market outcomes. We propose a flexible method for analysing the effect on wages aside from transitions from unemployment and employment within a multivariate duration model which controls for selection on observables and unobservables. We find that prolonging unemployment drastically decreases the chances of finding employment but hardly affects the quality of subsequent employment. The analysis suggests that negative duration dependence in the job finding rate is induced by negative signalling and not by human capital depreciation.

What Explains the Decline in Wage Mobility in the German Low-Wage Sector?

In this paper, we study how wage mobility in the low-wage sector has changed in western Germany between 1984 and 2004. Using German individual register data, we document a clear upward trend in the persistence of low-wage employment for both men and women. Next to compositional shifts of the low-wage sector relative to the high-wage sector, this trend may be explained by an increase in \genuinestate dependence, which occurs if low-wage employment today causes lowwage employment in the future for reasons of, e.g., stigmatization or human capital depreciation. To isolate the latter, we model low-pay transitions by estimating a series of multivariate probit models. We address the initial conditions problem and the endogeneity of earnings attrition in our estimation approach by accounting for the selection into low-wage employment and earnings retention. Our findings for men and women point to an upward trend of genuine state dependence among low paid workers especially since the beginning of the 1990s. Using decomposition techniques, we show that between 35 and 54 per cent of the increase in genuine state dependence during the 1990s is accounted for by compositional effects.

UNEMPLOYMENT, HUMAN CAPITAL DEPRECIATION, AND UNEMPLOYMENT INSURANCE POLICY

SUMMARYThis paper presents a structural estimation of a life cycle model with unemployment risk. The model allows for human capital depreciation during unemployment. It is estimated using German and US household‐level data. The data suggest that the adverse impact of unemployment on individual productivity is important in both countries, but quantitatively more relevant in Germany. Moreover, simulations show that the combination of skill depreciation with the generous unemployment insurance system that was in place in Germany until recently is a key factor in explaining the differences in labour market performance between these countries. Copyright © 2012 John Wiley & Sons, Ltd.

What Explains the Decline in Wage Mobility in the German Low-Wage Sector?

In this paper, we study how wage mobility in the low-wage sector has changed in western Germany between 1984 and 2004. Using German individual register data, we document a clear upward trend in the persistence of low-wage employment for both men and women. Next to compositional shifts of the low-wage sector relative to the high-wage sector, this trend may be explained by an increase in state dependence, which occurs if low-wage employment today causes low-wage employment in the future for reasons of, e.g., stigmatization or human capital depreciation. To isolate the latter, we model low-pay transitions by estimating a series of multivariate probit models. We address the initial conditions problem and the endogeneity of earnings attrition in our estimation approach by accounting for the selection into low-wage employment and earnings retention. Our findings for men and women point to an upward trend of genuine state dependence among low-paid workers especially since the beginning of the 1990s. Using decomposition techniques, we show that between 35 and 54 per cent of the increase in genuine state dependence during the 1990s is accounted for by compositional effects.

The social costs of unemployment: accounting for unemployment duration

This article contributes to the literature on unemployment and well-being by investigating the linkage between personal life satisfaction and a macroeconomic indicator of the duration of unemployment. Using data for more than 50 000 individuals in 10 European countries, 1992–2002, we find that the social costs of unemployment, in terms of general unemployment's impact on life satisfaction, relate significantly and to a considerable extent to unemployment duration. It is thus not just the risk of becoming or staying unemployed that people worry about, but especially the prospect of staying long-term unemployed. This fear affects employed and unemployed people alike. Our findings provide a strong point for focusing labour market policies on long-term unemployment, in addition to considerations of human capital depreciation.

On the Determinants of Organizational Forgetting

Studies of organizational learning and forgetting identify potential channels through which the firm's production experience is lost. These channels have differing implications for efficient resource allocation within the firm, but their relative importance has been ignored to date. We develop a framework for distinguishing the contributions of labor turnover and human capital depreciation to organizational forgetting. We apply our framework to a novel dataset of ambulance companies and their workforce. We find evidence of organizational forgetting, which results from skill decay and turnover effects. The latter has twice the magnitude of the former. (JEL D23, D83, J24, J63)

Unemployment, human capital depreciation and pension benefits: an empirical evaluation of German data

AbstractThis paper investigates empirically how unemployment-induced employment-breaks at different career stages influence pension benefits. The analysis is based on German data. I distinguish four different career phases and investigate to what extent the prevailing social security policy compensated for earning losses. The results suggest that (1) losses in pension benefits were the greatest if unemployment occurred in the middle of a career (between 31 and 50); (2) social security policies have had a mitigating effect on losses in pension benefits. These findings indicate that institutions have a decided influence on how career patterns translate into pension benefits.

Human capital obsolescence: some evidence for Spain

PurposeThe main objective of this paper is to analyse the link between human capital depreciation and the educational level of Spanish salaried workers.Design/methodology/approachWage equations are estimated by sector and occupation, following the empirical framework proposed by Neuman and Weiss. Data in this study refer to the Spanish labour market, using two cross‐sectional employee‐firm matched data.FindingsThe estimates provided in this paper suggest that human capital depreciation rates are not homogeneous for the whole sample; in contrast, they vary across educational levels, being greater as the workers' school attainment increases.Research limitations/implicationsThe main restriction of the paper is the limited availability of quality longitudinal data to estimate human capital depreciation.Practical implicationsKnowledge acquired by workers may quickly become obsolete in a context of technological change. Thus, the paper's main findings support the need for ongoing training programs to update workers' skills to changing market requirements.Originality/valueThe added value of this paper is two‐fold. On the one hand, returns to education and human capital depreciation for the Spanish labour force are estimated using a pseudo‐panel created from two cross‐sectional data bases. On the other hand, earnings equations are estimated by sector and occupation in order to calculate human capital depreciation rates; this procedure allows the authors to take into account the worker's occupation and their level of education as well as technological differences associated with their job.

Inactivité, travail et formation : quel partage pour les gains d'espérance de vie ?

Résumé Cet article examine les conditions à réunir pour légitimer que les temps consacrés à la formation, au travail et à la retraite ou aux autres formes d’inactivité connaissent des évolutions strictement proportionnelles à l’allongement de la durée de vie. On s’appuie sur un modèle illustratif avec représentation continue de l’âge qui génère des profils de cycle de vie réalistes. Un scénario d’allongement de la durée de vie est combiné avec diverses hypothèses sur les gains de productivité, la norme de consommation et l’obsolescence du capital humain. Une déformation homothétique du cycle de vie suppose non seulement des évolutions parallèles de la productivité et de la norme de consommation, mais aussi un décalage du profil de dépréciation du capital humain de même ampleur que la hausse de l’espérance de vie. Ce type d’approche peut également éclairer les aspects intra-générationnels du débat sur la retraite, à savoir la différenciation des droits à retraite entre individus à espérances de vie inégales.