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Recession and Resilience: Labor Market Consequences of Starting College in a Bad Economy

Author

Listed:
  • Choi, Eleanor J.

    (Hanyang University)

  • Jeong, Daeyoung

    (Yonsei University)

  • Lee, Chae

    (Hanyang University)

  • Yu, Kyuseob

    (University of Illinois at Urbana-Champaign)

Abstract

This study examines the impact of economic conditions at college entry on post-graduation labor market outcomes, focusing on behavioral responses related to job market preparation and career advancement. Exploiting variation in regional unemployment rates within college entry cohorts, we utilize the large and unexpected recession triggered by the Asian Financial Crisis in South Korea as a natural experiment. Using data from the Korean Labor and Income Panel Study, we find that individuals who begin their undergraduate studies under more adverse economic conditions exhibit higher employment probabilities and earnings during the first decade after graduation. Further analysis of activities during college and early career stages indicates that the improved labor market outcomes are driven by greater effort devoted to education, training, and job search aimed at enhancing employment prospects. To explain these behavioral responses, we develop a theoretical framework based on the concept of ambiguity aversion.

Suggested Citation

  • Choi, Eleanor J. & Jeong, Daeyoung & Lee, Chae & Yu, Kyuseob, 2025. "Recession and Resilience: Labor Market Consequences of Starting College in a Bad Economy," IZA Discussion Papers 18219, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp18219
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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