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The scars of youth : effects of early-career unemployment on future unemployment experience

  • Schmillen, Achim

    (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

  • Umkehrer, Matthias

    ()

    (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

"Does early-career unemployment cause future unemployment? We answer this question with German administrative matched employer-employee data that track more than 800,000 individuals over 24 years. Using a censored quantile instrumental variable estimator and instrumenting early-career unemployment with local labor market conditions at labor market entry and firm-specific labor demand shocks, we find significant and longlasting scarring effects. At the median, an additional day of unemployment during the first eight years on the labor market increases unemployment in the following 16 years by 0.96 days. Effects are even stronger in the right tail of the unemployment distribution. Likely due to unobserved heterogeneity in returns to search, they are also understated by non-IV estimates." (Author's abstract, IAB-Doku) ((en))

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Paper provided by Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] in its series IAB Discussion Paper with number 201306.

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Length: 54 pages
Date of creation: 23 May 2013
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Handle: RePEc:iab:iabdpa:201306
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