IZA DP No. 3578: The Short- and Long-Term Career Effects of Graduating in a Recession: Hysteresis and Heterogeneity in the Market for College Graduates
published in: American Economic Journal: Applied Economics, 2012, 4 (1), 1-29
This paper analyzes the long-term effects of graduating in a recession on earnings, job mobility, and employer characteristics for a large sample of Canadian college graduates using matched university-employer-employee data from 1982 to 1999. The results are used to assess the role of job mobility and firm quality in the propagation of shocks for different groups in the labor market. We find that young graduates entering the labor market in a recession suffer significant initial earnings losses that, on average, eventually fade after 8 to 10 years. Labor market conditions at graduation affect firm quality and job mobility, which can account for 40-50% of losses and catch-up in our sample. We also document that higher skilled graduates suffer less from entry in a recession because they switch to better firms quickly. Lower skilled graduates are permanently affected by being down ranked to low-wage firms. These adjustment patterns are consistent with differential choices of intensity of search for better employers arising from comparative advantage and time-increasing search costs. All results are robust to an extensive sensitivity analysis including controls for correlated business cycle shocks after labor market entry, endogenous timing of graduation, permanent cohort differences, and selective labor force participation.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.