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  5. Skill Depreciation during Unemployment: Evidence from Panel Data

American Economic Journal:
Applied Economics

ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)

Skill Depreciation during Unemployment: Evidence from Panel Data

  • Jonathan Cohen
  • Andrew C. Johnston
  • Attila Lindner
American Economic Journal: Applied Economics (Forthcoming)

Abstract

We examine the depreciation of skills among unemployed German workers using a panel of skill measures linked to administrative data. Both the reemployment hazard and reemployment earnings steadily decline with unemployment duration. Indicators of depression and loneliness also rise substantially. However, we find no decline in a wide range of cognitive and non-cognitive skills while workers remain unemployed. We find the same pattern in a panel of American workers. The results imply that skill depreciation in general human capital is unlikely to be a major explanation for observed duration dependence in reemployment outcomes.

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