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The Effect of Labor Market Shocks across the Life Cycle

Author

Listed:
  • Kjell G. Salvanes
  • Barton Willage
  • Alexander Willén

Abstract

Economic shocks occur frequently and may cause individuals to reevaluate key life decisions in ways that have lasting consequences for themselves and the broader economy. These decisions are tied to life stages, and the effect of economic shocks may differ depending on when they occur. We exploit exogenous job separations to study the impact of adverse shocks across the life cycle on labor market outcomes and major life decisions: education, mobility, family structure, and retirement. We find significant heterogeneity across the life cycle and conclude that focusing on average effects among workers across the life cycle misses a great deal.

Suggested Citation

  • Kjell G. Salvanes & Barton Willage & Alexander Willén, 2024. "The Effect of Labor Market Shocks across the Life Cycle," Journal of Labor Economics, University of Chicago Press, vol. 42(1), pages 121-160.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/722086
    DOI: 10.1086/722086
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    Cited by:

    1. Aitor Irastorza-Fadrique & Peter Levell & Matthias Parey, 2023. "Household responses to trade shocks," IFS Working Papers W23/13, Institute for Fiscal Studies.
    2. Pedro Carneiro & Kjell Salvanes & Barton Willage & Alexander Willén, 2023. "Childhood Shocks Across Ages and Human Capital Formation," Working Papers 2023-018, Human Capital and Economic Opportunity Working Group.
    3. Ria Ivandic & Anne Sophie Lassen, 2023. "Gender Gaps From Labor Market Shocks," Upjohn Working Papers 23-387, W.E. Upjohn Institute for Employment Research.
    4. Ria Ivandic & Anne Sophie Lassen, 2023. "Gender gaps from labor market shocks," CEP Discussion Papers dp1944, Centre for Economic Performance, LSE.
    5. Bingley, Paul & Cappellari, Lorenzo & Ovidi, Marco, 2023. "When It Hurts the Most: Timing of Parental Job Loss and a Child's Education," IZA Discussion Papers 16367, IZA Network @ LISER.
    6. Samuel Dodini & Kjell G. Salvanes & Alexander Willén & Li Zhu & Alexander L.P. Willén, 2023. "The Career Effects of Union Membership," CESifo Working Paper Series 10469, CESifo.
    7. Ivandic, Ria & Lassen, Anne Sophie, 2023. "Gender gaps from labor market shocks," LSE Research Online Documents on Economics 121285, London School of Economics and Political Science, LSE Library.
    8. Kim, Seonghoon & Wang, Lanjie, 2024. "Navigating Unemployment without Unemployment Insurance: Evidence from Singapore," IZA Discussion Papers 17299, IZA Network @ LISER.
    9. Carneiro, Pedro & Salvanes, Kjell G. & Willage, Barton & Willén, Alexander, 2022. "The Timing of Parental Job Displacement, Child Development and Family Adjustment," Discussion Paper Series in Economics 12/2022, Norwegian School of Economics, Department of Economics.
    10. Dodini, Samuel & Willén, Alexander, 2025. "The Power to Discriminate," Discussion Paper Series in Economics 10/2025, Norwegian School of Economics, Department of Economics.
    11. Ivandić, Ria & Lassen, Anne Sophie, 2023. "Gender gaps from labor market shocks," Labour Economics, Elsevier, vol. 83(C).
    12. Cloé Garnache & Elisabeth Isaksen & Maria Nareklishvili, 2025. "Labor Market Impacts of the Green Transition: Evidence from a Contraction in the Oil Industry," CESifo Working Paper Series 12057, CESifo.
    13. Irastorza-Fadrique, Aitor & Levell, Peter & Parey, Matthias, 2025. "Household responses to trade shocks," Journal of International Economics, Elsevier, vol. 157(C).
    14. David, Sandberg, 2024. "The Effect of Military Base Closures on Young Adults," Working Papers 2024:9, Lund University, Department of Economics.

    More about this item

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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