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  3. American Economic Review
  4. May 2017
  5. Heterogeneous Scarring Effects of Full-Year Nonemployment

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Heterogeneous Scarring Effects of Full-Year Nonemployment

  • Fatih Guvenen
  • Fatih Karahan
  • Serdar Ozkan
  • Jae Song
American Economic Review
vol. 107, no. 5, May 2017
(pp. 369–73)
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Abstract

Drawing on administrative data from the Social Security Administration, we find that individuals that go through a long period of non-employment suffer large and long-term earnings losses (around 35-40 percent) compared to individuals with similar age and previous earnings histories. Importantly, these differences depend on past earnings, and are largest at the bottom and top of the earnings distribution. Focusing on workers that are employed 10 years after a period of long-term non-employment, we find much smaller earnings losses (8-10 percent). Furthermore, the large earnings losses of low-income individuals are almost entirely due to employment effects.

Citation

Guvenen, Fatih, Fatih Karahan, Serdar Ozkan, and Jae Song. 2017. "Heterogeneous Scarring Effects of Full-Year Nonemployment." American Economic Review, 107 (5): 369–73. DOI: 10.1257/aer.p20171012

Additional Materials

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • J64 Unemployment: Models, Duration, Incidence, and Job Search