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Scarring effects of the first labour market experience: A sibling based analysis

The paper studies the relationship between teenagers’ first labour market experience and subsequent labour market performance using data on all Swedish youths graduating from vocational high school programmes in 1991–94. Sibling fixed-effects combined with detailed data on high school programmes, grades and work experience during high school are used in order to identify the causal long-run effects of experiencing unemployment subsequent to graduation. The results show a 3 percentage-points increase in the unemployment probability and a 17 % reduction in annual earnings after 5 years due to post-graduation unemployment. The results thus show that teenage labour market failure is in fact costly even though most teenagers have relatively short unemployment spells.

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Paper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2004:14.

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Length: 43 pages
Date of creation: 10 Nov 2004
Date of revision:
Handle: RePEc:hhs:ifauwp:2004_014
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  1. John Bound & Gary Solon, 1998. "Double Trouble: On the Value of Twins-Based Estimation of the Return to Schooling," NBER Working Papers 6721, National Bureau of Economic Research, Inc.
  2. Heckman, James J & Borjas, George J, 1980. "Does Unemployment Cause Future Unemployment? Definitions, Questions and Answers from a Continuous Time Model of Heterogeneity and State Dependence," Economica, London School of Economics and Political Science, vol. 47(187), pages 247-83, August.
  3. Agell, Jonas & Bennmarker, Helge, 2002. "Wage policy and endogenous wage rigidity: a representative view from the inside," Working Paper Series 2002:12, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  4. Arulampalam, Wiji, 2000. "Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages," IZA Discussion Papers 189, Institute for the Study of Labor (IZA).
  5. Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-41, May.
  6. Hakkinen, Iida, 2006. "Working while enrolled in a university: does it pay?," Labour Economics, Elsevier, vol. 13(2), pages 167-189, April.
  7. Bertil Holmlund, 2003. "The Rise and Fall of Swedish Unemployment," CESifo Working Paper Series 918, CESifo Group Munich.
  8. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-88, August.
  9. Eliason, Marcus & Storrie, Donald, 2004. "The Echo of Job Displacement," Working Papers in Economics 135, University of Gothenburg, Department of Economics.
  10. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
  11. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  12. Thomas A. Mroz & Timothy H. Savage, 2006. "The Long-Term Effects of Youth Unemployment," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
  13. Stefan Eriksson & Jonas Lagerström, 2006. "Competition between Employed and Unemployed Job Applicants: Swedish Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(3), pages 373-396, October.
  14. Alois Stutzer & Rafael Lalive, 2004. "The Role of Social Work Norms in Job Searching and Subjective Well-Being," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 696-719, 06.
  15. Griliches, Zvi, 1979. "Sibling Models and Data in Economics: Beginnings of a Survey," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S37-64, October.
  16. Knights, Stephen & Harris, Mark N & Loundes, Joanne, 2002. "Dynamic Relationships in the Australian Labour Market: Heterogeneity and State Dependence," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 284-98, September.
  17. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
  18. Hedström, Peter & Kolm, Ann-Sofie & Åberg, Yvonne, 2003. "Social interactions and unemployment," Working Paper Series 2003:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  19. Arulampalam, Wiji, 2002. "State Dependence in Unemployment Incidence: Evidence for British Men Revisited," IZA Discussion Papers 630, Institute for the Study of Labor (IZA).
  20. Gregg, Paul, 2001. "The Impact of Youth Unemployment on Adult Unemployment in the NCDS," Economic Journal, Royal Economic Society, vol. 111(475), pages F626-53, November.
  21. Muhleisen, Martin & Zimmermann, Klaus F., 1994. "A panel analysis of job changes and unemployment," European Economic Review, Elsevier, vol. 38(3-4), pages 793-801, April.
  22. Ekström, Erika, 2002. "The value of a third year in upper secondary vocational education - Evidence from a piloting scheme," Working Paper Series 2002:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  23. David T. Ellwood, 1982. "Teenage Unemployment: Permanent Scars or Temporary Blemishes?," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 349-390 National Bureau of Economic Research, Inc.
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