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

Author

Listed:
  • Liu, Kai

    () (University of Cambridge)

  • Salvanes, Kjell G.

    () (Norwegian School of Economics)

  • Sørensen, Erik Ø.

    () (Norwegian School of Economics)

Abstract

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.

Suggested Citation

  • Liu, Kai & Salvanes, Kjell G. & Sørensen, Erik Ø., 2012. "Good Skills in Bad Times: Cyclical Skill Mismatch and the Long-Term Effects of Graduating in a Recession," IZA Discussion Papers 6820, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6820
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bart Cockx, 2016. "Do youths graduating in a recession incur permanent losses?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 281-281, August.
    2. Clark, Brian & Joubert, Clement & Maurel, Arnaud, 2014. "The Career Prospects of Overeducated Americans," IZA Discussion Papers 8313, Institute for the Study of Labor (IZA).
    3. Beatrice Brunner & Andreas Kuhn, 2014. "The impact of labor market entry conditions on initial job assignment and wages," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 705-738, July.
    4. Newhouse, David & Wolff, Claudia, 2014. "Cohort Size and Youth Employment Outcomes," IZA Discussion Papers 8197, Institute for the Study of Labor (IZA).
    5. Reggio Ojeda, Iliana Gabriela & Alba Ramírez, Alfonso, 2017. "Graduating into a recession," UC3M Working papers. Economics 25363, Universidad Carlos III de Madrid. Departamento de Economía.
    6. Escudero, Verónica. & López Mourelo, Elva., 2015. "The Youth Guarantee programme in Europe features, implementation and challenges," ILO Working Papers 994888913402676, International Labour Organization.
    7. Jonathan Cribb & Andrew Hood & Robert Joyce, 2017. "Entering the labour market in a weak economy: scarring and insurance," IFS Working Papers W17/27, Institute for Fiscal Studies.
    8. Summerfield, Fraser, 2014. "Labor Market Conditions, Skill Requirements and Education Mismatch," CLSSRN working papers clsrn_admin-2014-19, Vancouver School of Economics, revised 28 Apr 2014.
    9. repec:bla:ecinqu:v:55:y:2017:i:3:p:1370-1387 is not listed on IDEAS
    10. Stratton, Leslie S., 2017. "Housing Prices, Unemployment Rates, Disadvantage, and Progress toward a Degree," IZA Discussion Papers 10941, Institute for the Study of Labor (IZA).
    11. repec:spr:italej:v:3:y:2017:i:1:d:10.1007_s40797-016-0044-9 is not listed on IDEAS
    12. Päällysaho, Miika Matias, 2017. "The Short- and Long-Term Effects of Graduating During a Recession: Evidence from Finland," Working Papers 96, VATT Institute for Economic Research.
    13. repec:spr:izalbr:v:6:y:2017:i:1:d:10.1186_s40172-017-0053-4 is not listed on IDEAS
    14. Long, Mark C. & Goldhaber, Dan & Huntington-Klein, Nick, 2015. "Do completed college majors respond to changes in wages?," Economics of Education Review, Elsevier, vol. 49(C), pages 1-14.
    15. Fredrik Carlsen & Jorn Rattso & Hildegunn E. Stokke, 2013. "Education, experience and dynamic urban wage premium," Working Paper Series 15213, Department of Economics, Norwegian University of Science and Technology.
    16. Cockx, Bart & Ghirelli, Corinna, 2016. "Scars of recessions in a rigid labor market," Labour Economics, Elsevier, vol. 41(C), pages 162-176.
    17. repec:eee:labeco:v:47:y:2017:i:c:p:64-74 is not listed on IDEAS
    18. Wiljan van den Berge & Arne Brouwers, 2017. "A lost generation? The early career effects of graduating during a recession," CPB Discussion Paper 356, CPB Netherlands Bureau for Economic Policy Analysis.
    19. repec:ilo:ilowps:488891 is not listed on IDEAS
    20. Hogrefe, Jan & Sachs, Andreas, 2014. "Unemployment and labor reallocation in Europe," ZEW Discussion Papers 14-083, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    21. Brian Clark & Arnaud Maurel & Clement Joubert, 2014. "Career Prospects of Overeducated Americans," 2014 Meeting Papers 400, Society for Economic Dynamics.

    More about this item

    Keywords

    mismatch; business cycle; graduation;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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