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The impact of labor market entry conditions on initial job assignment and wages

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  • Beatrice Brunner
  • Andreas Kuhn

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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 and a sizable negative long-run effect. Our preferred estimates imply a decrease in starting wages by about 0.9 % and a lifetime loss in wages of about 1.3 % for an increase in the initial local unemployment rate by one percentage point. We show that poor entry conditions are associated with lower quality of a worker’s first employer and that the quality of workers’ first employer explains as much as three-quarters of the observed long-run wage effects resulting from poor entry conditions. Moreover, wage effects are much more persistent for blue-collar workers because some of them appear to be permanently locked in into low-paying jobs/tasks. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Beatrice Brunner & Andreas Kuhn, 2014. "The impact of labor market entry conditions on initial job assignment and wages," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 705-738, July.
  • Handle: RePEc:spr:jopoec:v:27:y:2014:i:3:p:705-738
    DOI: 10.1007/s00148-013-0494-4
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    Cited by:

    1. repec:bla:ecinqu:v:55:y:2017:i:1:p:223-236 is not listed on IDEAS
    2. Hiroshi Teruyama & Hiroyuki Toda, 2017. "Polarization and Persistence in the Japanese Labor Market," KIER Working Papers 957, Kyoto University, Institute of Economic Research.
    3. Venke Furre Haaland, 2016. "The lost generation: Effects of youth labor market opportunities on long-term labor market outcomes," Discussion Papers 835, Statistics Norway, Research Department.
    4. Liu, Kai & Salvanes, Kjell G. & Sørensen, Erik Ø., 2016. "Good skills in bad times: Cyclical skill mismatch and the long-term effects of graduating in a recession," European Economic Review, Elsevier, vol. 84(C), pages 3-17.
    5. Neel Rao, 2016. "The Impact Of Macroeconomic Conditions In Childhood On Adult Labor Market Outcomes," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1425-1444, July.
    6. Bart Cockx, 2016. "Do youths graduating in a recession incur permanent losses?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 281-281, August.
    7. Fernández-Kranz, Daniel & Rodríguez-Planas, Núria, 2017. "The Perfect Storm: Graduating in a Recession in a Segmented Labor Market," IZA Discussion Papers 10597, Institute for the Study of Labor (IZA).
    8. Reggio Ojeda, Iliana Gabriela & Alba Ramírez, Alfonso, 2017. "Graduating into a recession," UC3M Working papers. Economics 25363, Universidad Carlos III de Madrid. Departamento de Economía.
    9. Liu, Shimeng & Sun, Weizeng & Winters, John V., 2017. "Up in STEM, Down in Business: Changing College Major Decisions with the Great Recession," IZA Discussion Papers 10996, Institute for the Study of Labor (IZA).
    10. repec:bla:ecinqu:v:55:y:2017:i:3:p:1370-1387 is not listed on IDEAS
    11. Päällysaho, Miika Matias, 2017. "The Short- and Long-Term Effects of Graduating During a Recession: Evidence from Finland," Working Papers 96, VATT Institute for Economic Research.
    12. Cockx, Bart & Ghirelli, Corinna, 2016. "Scars of recessions in a rigid labor market," Labour Economics, Elsevier, vol. 41(C), pages 162-176.
    13. Leombruni, Roberto & Razzolini, Tiziano & Serti, Francesco, 2015. "The Hidden Cost of Labor Market Entry During Recession: Unemployment Rate at Entry and Occupational Injury Risk of Young Workers," IZA Discussion Papers 8968, Institute for the Study of Labor (IZA).
    14. Wiljan van den Berge & Arne Brouwers, 2017. "A lost generation? The early career effects of graduating during a recession," CPB Discussion Paper 356, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Boffy-Ramirez, Ernest, 2016. "The Heterogeneous Impacts of Business Cycles on Educational Attainment," IZA Discussion Papers 10167, Institute for the Study of Labor (IZA).
    16. By Barbara Mueller & Jürg Schweri, 2015. "How specific is apprenticeship training? Evidence from inter-firm and occupational mobility after graduation," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 1057-1077.

    More about this item

    Keywords

    Initial labor market conditions; Endogenous labor market entry; Initial job assignment; E32; J31; J62;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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