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Good Skills in Bad Times: Cyclical Skill Mismatch and the Long-Term Effects of Graduating in a Recession

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Author Info

  • Liu, Kai

    ()
    (Norwegian School of Economics)

  • Salvanes, Kjell G.

    ()
    (Norwegian School of Economics)

  • Sørensen, Erik Ø.

    ()
    (Norwegian School of Economics)

Abstract

We show that cyclical skill mismatch, defined as mismatch between the skills supplied by college graduates and skills demanded by hiring industries, is an important mechanism behind persistent career loss from graduating in recessions. Using Norwegian data, we find a strong countercyclical pattern of skill mismatch among college graduates. Initial labor market conditions have a declining but persistent effect on the probability of mismatch early in their careers. We provide a simple model of industry mobility that is consistent with our empirical findings. The initially mismatched graduates are also more vulnerable to business cycle variations at the time of graduation.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6820.

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Length: 42 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6820

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Keywords: mismatch; business cycle; graduation;

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References

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  1. Magali BEFFY & Denis FOUGERE & Arnaud MAUREL, 2009. "Choosing the Field of Study in Post-Secondary Education : Do Expected Earnings Matter ?," Working Papers 2009-14, Centre de Recherche en Economie et Statistique.
  2. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
  3. Marcus Hagedorn & Iourii Manovskii, 2013. "Job Selection and Wages over the Business Cycle," American Economic Review, American Economic Association, vol. 103(2), pages 771-803, April.
  4. Kondo, Ayako, 2007. "Does the first job really matter? State dependency in employment status in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 21(3), pages 379-402, September.
  5. Yuji Genda & Ayako Kondo & Souichi Ohta, 2010. "Long-Term Effects of a Recession at Labor Market Entry in Japan and the United States," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
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Cited by:
  1. Fredrik Carlsen & Jorn Rattso & Hildegunn E. Stokke, 2013. "Education, experience and dynamic urban wage premium," Working Paper Series 15213, Department of Economics, Norwegian University of Science and Technology.
  2. Brian Clark & Clément Joubert & Arnaud Maurel, 2014. "The Career Prospects of Overeducated Americans," NBER Working Papers 20167, National Bureau of Economic Research, Inc.
  3. Beatrice Brunner & Andreas Kuhn, 2014. "The impact of labor market entry conditions on initial job assignment and wages," Journal of Population Economics, Springer, vol. 27(3), pages 705-738, July.
  4. Newhouse, David & Wolff, Claudia, 2014. "Cohort size and youth employment outcomes," Policy Research Working Paper Series 6848, The World Bank.
  5. Summerfield, Fraser, 2014. "Labor Market Conditions, Skill Requirements and Education Mismatch," CLSSRN working papers clsrn_admin-2014-19, Vancouver School of Economics, revised 28 Apr 2014.

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