Research
Research
Working Papers
Skill Obsolescence and the Consequences of Job Loss (Job Market Paper)
Abstract: This paper studies how within-occupation skill obsolescence shapes the consequences of involuntary job loss. I combine the NLSY79 worker panel with occupation–year task demands derived from vacancy text to construct a worker-specific measure of exposure to obsolescence. Exposure arises when a worker’s strongest (primary) skills, or multiple skills, become less valued in their pre-displacement occupation. I distinguish workers who face primary-skill exposure, high exposure, and those who are non-exposed. Using a staggered difference-in-differences design, I estimate dynamic effects of displacement separately for each group. Displacement causes sizable and persistent earnings and employment losses, which are much larger for exposed workers. In the first year after displacement, exposed workers lose roughly 30% of their pre-displacement earnings, compared with about 20% for non-exposed workers, and their earnings remain depressed even eight years later. A decomposition shows that these persistent losses operate mainly through the extensive margin: exposed workers spend more weeks out of work rather than working fewer hours or at much lower wages. Following displacement, exposed workers move to occupations that are farther away in task space but better aligned with their underlying skills, indicating that restoring skill alignment requires longer and more costly search.
Economic Growth and Employment under Innovation Policies
Abstract: This paper studies the impact of innovation policies on productivity growth and unemployment when job matching is frictional. I build a DSGE model of Schumpeterian creative destruction with search-and-matching frictions, featuring two opposing channels: a capitalization effect that spurs vacancy creation and a creative-destruction effect that raises separations. Calibrated to U.S. data (2003–2019), the model evaluates three instruments—direct R&D wage subsidies, incremental R&D tax credits, and corporate profit-tax cuts. Stronger, targeted innovation support raises long-run TFP growth but increases equilibrium unemployment, revealing a transparent growth–unemployment trade-off. Doubling direct subsidies lifts TFP growth by 0.04 percentage points and delivers a 1.5% consumption-equivalent welfare gain; doubling tax credits yields smaller growth and welfare effects but superior cost-effectiveness per fiscal dollar. Broad corporate tax cuts reduce effective R&D incentives, lowering growth and welfare despite slightly lower unemployment.
Skill Obsolescence in the Face of Technological Change
Abstract: Technological progress has significantly transformed the labour market, leading to shifts in occupational structures and the skills required within these occupations. This paper examines the phenomenon of skill obsolescence and its impact on labour market outcomes. Utilising data from the National Longitudinal Survey of Youth 1979 (NLSY79) and job advertisement data from major U.S. newspapers, we analyse changes in cognitive, manual, and interpersonal skill demands from 1978 to 2000. This study adopts a multidimensional view of skills, recognising the heterogeneous nature of workers' skill sets and their varied exposure to obsolescence. I find that workers experiencing high levels of skill obsolescence face more severe adverse outcomes, including reduced earnings and prolonged unemployment, and are more likely to switch occupations. In contrast, workers whose primary skills become obsolete but possess other valuable skills tend to remain in their current occupations, potentially adapting through reskilling or upskilling. These findings emphasizes the importance of continuous learning and targeted policy interventions to support workers in an evolving labour market.