Aggregate unemployment decreases individual returns to education |
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| Authors: | Andreas Ammermueller Anja Kuckulenz Thomas Zwick |
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| Institution: | 1. Federal Ministry of Labour and Social Affairs (BMAS), 11017 Berlin, Germany;2. Telefónica Deutschland GmbH, 80992 Munich, Germany;3. Ludwig-Maximilians University (LMU), Ludwigstr. 28RG Zi.309, 80539 Munich, Germany;4. Centre for European Economic Research (ZEW), 68034 Mannheim, Germany |
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| Abstract: | Aggregate unemployment may affect individual returns to education through qualification-specific responses in participation and wage bargaining. This paper shows that an increase in regional unemployment by 1% decreases returns to education by 0.005 percentage points. This implies that higher skilled employees are better sheltered from labour market changes with respect to their jobs but they encounter larger wage changes than less skilled employees. We use representative individual data and panel variation in unemployment between German regions and employee groups. We demonstrate that our results are robust with respect to aggregation bias, time lags and potential endogeneity of the unemployment variable. |
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| Keywords: | C23 J24 |
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