The main chapter of the PhD dissertation by Benedkit Herz (Economics ’08, GPEFM ’13), “Specific Human Capital and Wait Unemployment,” has been published in the Journal of Labor Economics and is now available online.
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 the fact that the more a worker has invested in occupation-specific human capital, the more costly it is for him to switch occupations and therefore the higher is his incentive to wait. I find that between 9% and 17% of total unemployment in the United States can be attributed to wait unemployment
Benedikt Herz ’08 is member of the Chief Economist’s Team, European Commission DG for Internal Market and Industry. He is an alum of the Barcelona GSE Master’s in Economics.