Specific Human Capital and Wait Unemployment
45 Pages Posted: 17 Nov 2016 Last revised: 13 Feb 2017
Date Written: February 12, 2017
A displaced worker might rationally prefer to wait through a long spell of unemployment instead of seeking employment at a lower wage in a job he is not trained for. I evaluate this trade-off using micro-data on displaced workers. To achieve identification, I exploit that the more a worker invested in occupation-specific human capital the more costly it is for him to switch occupations and the higher is therefore his incentive to wait. I find that between 9% and 18% of total unemployment in the United States can be attributed to wait unemployment.
Keywords: wait unemployment, rest unemployment, specific human capital, worker mobility, mismatch, displaced workers
JEL Classification: E24, J61, J62
Suggested Citation: Suggested Citation