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The Impact of Labor Market Entry Conditions on Initial Job Assignment, Human Capital Accumulation, and Wages

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Author Info

  • Brunner, Beatrice

    ()
    (University of Zurich)

  • Kuhn, Andreas

    ()
    (Swiss Federal Institute for Vocational Education and Training)

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    Abstract

    We estimate the effects of labor market entry conditions on wages for male individuals first entering the Austrian labor market between 1978 and 2000. We find a large negative effect of unfavorable entry conditions on starting wages as well as a sizeable negative long-run effect. Specifically, we estimate that a one percentage point increase in the initial local unemployment rate is associated with an approximate shortfall in lifetime earnings of 6.5%. We also show that bad entry conditions are associated with lower quality of a worker's first job and that initial wage shortfalls associated with bad entry conditions only partially evaporate upon involuntary job change. These and additional findings support the view that initial job assignment, in combination with accumulation of occupation or industry-specific human capital while on this first job, plays a key role in generating the observed wage persistencies.

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    Bibliographic Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5360.

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    Length: 44 pages
    Date of creation: Dec 2010
    Date of revision:
    Handle: RePEc:iza:izadps:dp5360

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    Related research

    Keywords: initial labor market conditions; endogenous labor market entry; initial job assignment; specific human capital;

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    1. Sylvia Frühwirth-Schnatter & Andrea Weber & Rudolf Winter-Ebmer, 2010. "Labor Market Entry and Earnings Dynamics: Bayesian Inference Using Mixtures-of-Experts Markov Chain Clustering," Economics working papers 2010-11, Department of Economics, Johannes Kepler University Linz, Austria.
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