A Cross-Country Study of Workers' Skills and Unemployment Flows
36 Pages Posted: 24 Jan 2017 Last revised: 4 Sep 2018
Date Written: August 31, 2018
In a comparison of 29 countries, I document that formal education (years spent in education), non-cognitive skills (social trust) and cognitive skills (numeracy score) have an unconditional correlation with the log-risk-ratio of exiting to entering unemployment of 0.27, of 0.48 and of 0.70, respectively. The multivariate analysis highlights cognitive skills as the key source of the international differences in unemployment flows. While all three measures of skills together explain 49.0 percent of the variance in the log-risk-ratio across countries, the numeracy score alone already accounts for 48.5 percent of the variance. I provide evidence that the estimated effects of skills on unemployment flows are not due to reverse causality.
Keywords: Gross Worker Flows, Unemployment, Cognitive Skills, Versatility, Education, International Comparisons, Survey of Adult Skills, PIAAC
JEL Classification: J20, J24, J60, J64, I20
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