Changing Tracks: Human Capital Investment after Loss of Ability

We provide the first evidence on how workers invest in human capital after losing ability. Using quasi-random work accidents in Danish administrative data, we find that workers enroll in bachelor’s programs after physical injuries, pursuing degrees that build on their work experiences and provide pathways to cognitive occupations. Exploiting differences in eligibility driven by prior vocational training, we find that higher education moves injured workers from disability benefits to full-time employment. Reskilled workers earn 25% more than before their injuries and do not end up on antidepressants. Without higher education, by contrast, these workers end up entirely on disability benefits and often resort to taking antidepressants. Reskilling subsidies for injured workers pay for themselves four times over, and current rates of reskilling are substantially below the social optimum, especially for middle-aged workers. JEL Codes: I26, J24, J62. ∗We thank Dan Black, Christopher Campos, Manasi Deshpande, Mark Duggan, Emir Kamenica, Bruce Meyer, Matthew Notowidigdo, Canice Prendergast, Evan Rose, and seminar participants at Aarhus, Chicago, Copenhagen, Stanford, and the 2023 ASSA Annual Meeting for helpful comments and suggestions. Jiaxuan Lu provided excellent research assistance. We acknowledge funding from the Rockwool Foundation Research Unit. †University of Chicago, Booth School of Business, anders.humlum@chicagobooth.edu ‡University of Copenhagen, Department of Economics, jakob.roland.munch@econ.ku.dk §University of Copenhagen, Department of Economics, pj@econ.ku.dk