The effect of unemployment on noncognitive skills

ABSTRACT

Unemployment results in lower levels of cognitive skills and has long-term effects on health and economic well-being. In this paper, I show that unemployment also has negative effects on noncognitive skills, at least in the short term. Using a sample of Germans born between 1945 and 1995, I account for potential endogeneity by using state-level unemployment rates as instruments and controlling for past levels of noncognitive skills. The effects of not working are strong, reducing conscientiousness by 0.15 of a standard deviation for women and by 0.25 for men.

KEYWORDS:

• Noncognitive skills
• conscientiousness
• unemployment
• recessions
• Germany

JEL CLASSIFICATION:

• J24
• D91
• J60

Acknowledgments

A special thanks to Marco Caliendo at the University of Potsdam and Carsten Schroeder at the DIW for hosting me during my sabbatical and to an anonymous referee.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ I use the 95% sample of Version 34, available to researchers outside of Germany.