The contribution of human capital dynamics and job mismatch to the slow recovery from the Great Recession
Title: The contribution of human capital dynamics and job mismatch to the slow recovery from the Great Recession
SNIC Project: SNIC 2020/5-236
Project Type: SNIC Medium Compute
Principal Investigator: Karl Walentin <karl.walentin@riksbank.se>
Affiliation: Sveriges riksbank, Stockholms universitet
Duration: 2020-06-01 – 2021-06-01
Classification: 50201
Homepage: http://www.riksbank.se/research/walentin
Keywords:

Abstract

In this paper we ask to what degree i) human capital dynamics induced by skill loss during unemployment and ii) decrease in match quality contributed to the slow recovery from the Great Recession, in particular the low post-2009 growth in GDP, employment, labor productivity and real wages. Match quality has decreased because of the sullying effect of the recession that follows from reduced hiring activity and the resulting collapse of the job ladder. We find that the increase in unemployment during the initial phase of the Great Recession had long-lasting effects through the skill loss it induced, mainly in terms of increased unemployment and reduced GDP. This model also has important policy implications regarding the recession induced by the Corona crisis; we will quantify the last effect of this recession and how they depend on both size and persistence of the Corona-recession.