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The long-term effects of labor market entry in a recession: Evidence from the Asian financial crisis

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  • Choi, Eleanor Jawon
  • Choi, Jaewoo
  • Son, Hyelim

Abstract

This study investigates the long-term effects of initial labor market conditions by comparing cohorts who graduated from college before, during, and after the 1997–1998 Asian financial crisis in South Korea. We measure the overall welfare effect by examining their labor market activities, family formation, and household finances. Using data from 20 waves of the Korean Labor and Income Panel Study, we find a substantial and persistent reduction in employment, earnings, marriage, fertility, and asset building among men who graduated during the recession. For women, limited job opportunities at graduation resulted in an increase in childbearing. We also find evidence that family provides a risk-sharing mechanism for recession graduates. Our results suggest that labor market entry in a large-scale recession has prolonged effects on a young worker’s life course even after the penalties in the labor market have disappeared.

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  • Choi, Eleanor Jawon & Choi, Jaewoo & Son, Hyelim, 2020. "The long-term effects of labor market entry in a recession: Evidence from the Asian financial crisis," Labour Economics, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:labeco:v:67:y:2020:i:c:s0927537120301305
    DOI: 10.1016/j.labeco.2020.101926
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    More about this item

    Keywords

    Recession; Financial crisis; Long-term effect; College graduate;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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