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

  • Liu, Kai


    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Salvanes, Kjell G.


    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Sørensen, Erik Ø.


    (Dept. of Economics, Norwegian School of Economics and Business Administration)

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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Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 16/2012.

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Length: 40 pages
Date of creation: 17 Aug 2012
Date of revision:
Handle: RePEc:hhs:nhheco:2012_016
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NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Phone: +47 55 959 277
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  1. 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.
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  7. Martin S. Feldstein & David T. Ellwood, 1982. "Teenage Unemployment: What is the Problem?," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 17-35 National Bureau of Economic Research, Inc.
  8. Peter Gottschalk & Michael Hansen, 2003. "Is the Proportion of College Workers in Noncollege Jobs Increasing?," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 409-448, April.
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  11. Leuven, Edwin & Oosterbeek, Hessel, 2011. "Overeducation and Mismatch in the Labor Market," IZA Discussion Papers 5523, Institute for the Study of Labor (IZA).
  12. 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).
  13. 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.
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  16. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2012. "The Short- and Long-Term Career Effects of Graduating in a Recession," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 1-29, January.
  17. David Neumark, 2002. "Youth Labor Markets In The United States: Shopping Around Vs. Staying Put," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 462-482, August.
  18. Oddbjørn Raaum & Knut Røed, 2006. "Do Business Cycle Conditions at the Time of Labor Market Entry Affect Future Employment Prospects?," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 193-210, May.
  19. 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.
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