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

  • Liu, Kai

    ()

    (University of Cambridge)

  • Salvanes, Kjell G.

    ()

    (Norwegian School of Economics)

  • Sørensen, Erik Ø.

    ()

    (Norwegian School of Economics)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6820.

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Length: 42 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6820
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  15. 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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