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American Economic Journal: Applied Economics: Vol. 4 No. 1 (January 2012)

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The Short- and Long-Term Career Effects of Graduating in a Recession

Article Citation

Oreopoulos, Philip, Till von Wachter, and Andrew Heisz. 2012. "The Short- and Long-Term Career Effects of Graduating in a Recession." American Economic Journal: Applied Economics, 4(1): 1-29.

DOI: 10.1257/app.4.1.1

Abstract

This paper analyzes the magnitude and sources of long-term earnings declines associated with graduating from college during a recession. Using a large longitudinal university-employer-employee dataset, we find that the cost of recessions for new graduates is substantial and unequal. Unlucky graduates suffer persistent earnings declines lasting ten years. They start to work for lower paying employers, and then partly recover through a gradual process of mobility toward better firms. We document that more advantaged graduates suffer less from graduating in recessions because they switch to better firms quickly, while earnings of less advantaged graduates can be permanently affected by cyclical downgrading. (JEL E32, I23, J22, J23, J31)

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Authors

Oreopoulos, Philip (U Toronto)
von Wachter, Till (Columbia U)
Heisz, Andrew (Statistics Canada)

JEL Classifications

E32: Business Fluctuations; Cycles
I23: Higher Education and Research Institutions
J22: Time Allocation and Labor Supply
J23: Labor Demand
J31: Wage Level and Structure; Wage Differentials

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