Working Paper: CEPR ID: DP18320
Authors: Zsofia Barany; Kerstin Holzheu
Abstract: In this paper, we study whether skills can be both an asset and a liability. We show that the accumulation of specialized skills not only increases the return to a specific activity but it also increases the exposure to labor market risks. Specialized workers, once displaced, might take longer to find a job, as their specialized skills might make them less productive across jobs on average. Yet, once they find a suitable job, that job is likely to be better matched to their skills, increasing job stability and entry wages. We empirically verify this hypothesis using displacement events in French and US data and find evidence for these links.
Keywords: specialization; skills; displacement
JEL Codes: J24; J41; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher levels of specialization (L29) | mismatch penalty (C78) |
| higher levels of specialization (L29) | longer durations of nonemployment after displacement (J65) |
| specialized skills (Y80) | higher entry wages (J31) |
| predisplacement specialization (J62) | post-displacement wages (J31) |
| higher specialization (Y80) | lower job separation rates (J63) |