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

  • Philip Oreopoulos
  • Till von Wachter
  • Andrew Heisz

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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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/app.4.1.1
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File URL: http://www.aeaweb.org/aej/app/app/2009-0288_app.pdf
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Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 4 (2012)
Issue (Month): 1 (January)
Pages: 1-29

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Handle: RePEc:aea:aejapp:v:4:y:2012:i:1:p:1-29
Note: DOI: 10.1257/app.4.1.1
Contact details of provider: Web page: https://www.aeaweb.org/aej-applied
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  17. Oreopoulos, Philip & Wachter, Till von & Heisz, Andrew, 2008. "The Short- and Long-Term Career Effects of Graduating in a Recession: Hysteresis and Heterogeneity in the Market for College Graduates," IZA Discussion Papers 3578, Institute for the Study of Labor (IZA).
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