Human Capital Effects of the Welfare State: Institutional Resources, Work Histories and Social Inequality (HCE)

The project addressed the role of job loss and childbirth as two trigger events that may result in significant losses of earnings capacity among prime-age workers. Using panel data for various European countries and the United States, the project empirically confirms that both job loss and unemployment lead to a significant and persistent deterioration of workers’ subsequent labour market prospects. As wage effects of job loss and child birth systematically increase with workers’ human capital, the project also confirms that devaluation and loss of human capital is a key underlying labor market mechanism. Comparing results across countries, Scandinavian-type labor market and welfare state institutions seem best suited to minimize the adverse effect of trigger events.