Full Citation
Title: The Hedgehog’s Curse: Knowledge Specialization and Displacement Loss
Citation Type: Working Paper
Publication Year: 2022
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DOI: 10.2139/ssrn.4273012
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Abstract: This paper studies the impact of knowledge specialization on earnings losses following displacement. We develop a novel measure of the specialization of human capital, based on how concentrated the knowledge used in an occupation is. Combining our measure with individual labor histories from the NLSY 79-97 and Norway’s LEED, we show that workers with more specialized human capital suffer larger earnings losses following exogenous displacement. A one standard deviation increase in pre-displacement knowledge specialization increases the earnings losses post-displacement by 3 to 4 pp per year in the US, and by 1.5 to 2 pp per year in Norway. In the US, the negative effect of higher pre-displacement knowledge specialization on post-displacement earnings is driven by the negative impact of knowledge specialization on well-paid outside opportunities. By contrast, this association between outside opportunities and knowledge specialization plays no role in post-displacement earnings losses in Norway, where the negative effect of specialization is in part explained by its association with the routine content and the offshoring probability of the occupation.
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Authors: Hernandez Martinez, Victor; Holter, Hans A.; Pinheiro, Roberto B.
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Publication Number: 22-31
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Pages: 1-80
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Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure
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