Events

Ms Gurkova Ekaterina
Ph.D. Candidate in Economics
University of California

This paper investigates the impact of temporary sectoral shocks on human capital accumulation and introduces a structural model to quantify their long-term general equilibrium effects. I use Spain’s economic boom (1995–2007) as a case study, which represented a positive labor demand shock in construction and low-skill services, and show that it led to a persistent decline in educational attainment among young workers. To evaluate the general equilibrium implications of this shock during the transition, I construct a quantitative lifecycle model in which workers endogenously choose education and sectoral employment under imperfect human capital transferability. The model reproduces the observed decline in educational attainment and sluggish labor reallocation following the boom. The transition, which is driven primarily by new cohorts, entails a persistent decline in aggregate productivity, with cumulative losses of about 7% and convergence to the steady state over roughly 50 years. The findings demonstrate that positive sectoral shocks can generate adverse long-run aggregate outcomes and substantial distributional effects—cohorts born during the boom experience lifetime earnings gains of nearly 11%, while those born before or after incur losses—highlighting the scope for redistributive policy interventions.