Using the data from the Survey of Income and Program Participation (SIPP) between 1996 and 2013, the effects of unemployment duration on the re-employment wages for workers 40 years of age and older are empirically estimated using a quasi-structural model. The findings indicate that the...

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 depreciation during unemployment into an otherwise standard New...

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 non-employment. We overcome these challenges with new administrative data on...

We present a model in which temporary shocks can permanently scar the economy's productive capacity. Unemployed workers lose skill and are expensive to retrain, generating multiple steady state unemployment rates. Large temporary shocks push the economy into a liquidity trap, generating...

We use a panel of survey responses linked to administrative data in Germany to measure the depreciation of skills while workers are unemployed. Both the reemployment hazard rate and reemployment earnings steadily fall with unemployment duration, and indicators of depression and loneliness rise...