A Joint Programme of Friedrich Schiller University and the Max Planck Institute of Economics, Jena
News DIME 2011

GSBC-EIC Paper wins the DIME Best Young Scholar Paper Award

The paper Skill shortage and skill redundancy: Asymmetry in the Transferability of Skills by Ljubica Nedelkoska (GSBC-EIC) and Frank Neffke (Erasmus School of Economics, Rot-terdam) won the Best Young Scholar Paper Award at the final conference of the European Network of Excellence DIME, held in Maastricht 6th-8th of April 2011. The award was also awarded to two other papers, one by Zakaria Babutsidzé (SKEMA Business School) and one by Tom Broekel (Utrecht University).

The paper Skill shortage and skill redundancy: Asymmetry in the Transferability of Skills proposes measures of skill shortage and skill redundancy between occupations, relevant for workers who switch occupations. It then empirically shows several interesting patterns. Workers switch to occupations where few skills acquired before are rendered redundant and where few new skills need to be learnt. When it comes to wages, the returns to useful and redundant skill experience are both economically and statistically significant, with the returns to redundant skills being about half of the returns to useful skill experience. The returns to redundant skill experience, while insignificant for low-earners, are non-negligible for workers at upper wage percen-tiles. This suggest that while for many workers redundant skills are simply sunk cost, other (better-paid) workers bring them into highly-productive use. Finally, we show that economic downturns result in high average skill redundancies, while economic upturns enable moves toward occupations where new skills can be learnt. This novel finding re-veals another side of the costs of economic recessions-they turn human capital into sunk cost not only through unemployment but also through poor occupational matching.