A Cross-Country Study of Workers' Skills and Unemployment Flows

Abstract

Using an international survey that directly assesses the cognitive skills of the adult population, I study the relation between skills and unemployment flows across 37 countries. Depending on the specifically assessed domain, I document that skills have an unconditional correlation with the log-risk-ratio of exiting to entering unemployment of 0.65–0.68 across the advanced and skill-abundant countries in the sample. The relation is remarkably robust and it is unlikely to be due to reverse causality. I do not find evidence that this positive relation extends to the seven relatively less advanced and less skill-abundant countries in the sample: Peru, Ecuador, Indonesia, Mexico, Chile, Turkey and Kazakhstan.

Keywords: gross worker flows, unemployment, skills, education, human capital, international comparisons, Survey of Adult Skills, PIAAC

JEL Classification: J20, J24, J60, J64, I20