Seminar in Microeconomics - Pascal St-Amour (University of Lausanne)
Self-Inflicted Unemployment Scarring and Stigma
Tuesday 5 November 2019 (12h15 - 13h30) - Extranef - 109
Unemployment scars include higher displacement, lower re-employment likeli- hoods, and income losses that increase in spell occurrence and duration. Human capital explanations assume that its accumulation is valued by the market, but is impaired by non-employment. We retain the former assumption, yet relax the latter by considering continuous investment decisions made by workers across employment statuses, where wages, displacement and re-employment risks are capital- dependent. We solve and structurally estimate the model and identify circular dynamics whereby human capital falls during unemployment spells and increases again upon re-employment. Scarring and stigma are self-inflicted, i.e. endogenously induced through decisions made by agents only.