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Human capital obsolescence: Some evidence for Spain

Purpose- The main objective of this paper is to analyse the link between human capital depreciation and the educational level of Spanish salaried workers. Design/methodology/approach- Wage equations are estimated by sector and occupation, following the empirical framework proposed by Neuman and Weiss. Data in this study refer to the Spanish labour market, using two cross‐sectional employee‐firm matched data. Findings- The estimates provided in this paper suggest that human capital depreciation rates are not homogeneous for the whole sample; in contrast, they vary across educational levels, being greater as the workers’ school attainment increases. Research limitations/implications- The main restriction of the paper is the limited availability of quality longitudinal data to estimate human capital depreciation. Practical implications- Knowledge acquired by workers may quickly become obsolete in a context of technological change. Thus, the paper’s main findings support the need for ongoing training programs to update workers’ skills to changing market requirements. Originality/value- The added value of this paper is two‐fold. On the one hand, returns to education and human capital depreciation for the Spanish labour force are estimated using a pseudo‐panel created from two cross‐sectional data bases. On the other hand, earnings equations are estimated by sector and occupation in order to calculate human capital depreciation rates; this procedure allows the authors to take into account the worker’s occupation and their level of education as well as technological differences associated with their job.