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In this paper we quantify the importance of human capital dynamics and job mismatch in slowing down recoveries from recessions, in particular the Great Recession. The basic question we ask is to what degree i) human capital dynamics induced by skill loss during unemployment and ii) job mismatch (low match quality) contributed to the slow recovery from the Great Recession, in particular the low post-2009 growth in GDP, labor productivity and real wages. Mismatch has increased because workers that lost their jobs in the recession tend to be less well matched compared to their pre-recession jobs. We find that the increase in unemployment during 2007-2009 had long-lasting effects through the skill loss it induced, mainly in terms of increased unemployment and reduced GDP.
