ZEW Discussion Papers
How Much Does a Year off Cost? - Estimating the Wage Effects of Employment Breaks and Part-Time Periods
Beblo, Miriam und Elke Wolf (2000), How Much Does a Year off Cost? - Estimating the Wage Effects of Employment Breaks and Part-Time Periods , ZEW Discussion Paper No. 00-69, Mannheim. Download
Discontinuities in the employment profile are supposed to cause wage cuts since
they imply an interruption in the accumulation of human capital as well as a
depreciation of the human capital stock built up in the past. In this paper, we
estimate the return to effective experience, taking into account both the timing and
the duration of non-work and part-time employment spells. Estimation results for
German women suggest that wage rates are substantially affected by discontinuities
in the employment pattern. Deviations from full-time employment are associated
with significant wage cuts. Postponing the discontinuity is associated with a fall of
the wage rate. We conclude that traditional wage estimations that do not control for
depreciation underestimate the return to effective experience. Controlling for
individual heterogeneity with respect to industry sector and job position decreases
the estimated depreciation rates. This we interpret as an indication for segregation in
the labor market.
