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The Long-Term Effects of Labor Market Entry in a Recession: Evidence from the Asian Financial Crisis

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  • Eleanor J. Choi

    (Hanyang University)

  • Jaewoo Choi

    (Korea Development Institute (KDI))

  • Hyelim Son

    (University of Seoul)

Abstract

This study investigates the long-term effects of initial labor market conditions by comparing cohorts who graduated from college before, during, and after the 1997–1998 Asian financial crisis in South Korea. We measure the overall welfare effect by examining their labor market activities, family formation, and household finances. Using data from 20 waves of the Korean Labor and Income Panel Study, we find a substantial and persistent reduction in employment, earnings, marriage, fertility, and asset building among men who graduated during a recession. For women, limited job opportunities at graduation result in an increase in childbearing. Our results suggest that labor market entry in a large-scale recession has prolonged effects on a young worker’s life course even after the penalties in the labor market have disappeared.

Suggested Citation

  • Eleanor J. Choi & Jaewoo Choi & Hyelim Son, 2020. "The Long-Term Effects of Labor Market Entry in a Recession: Evidence from the Asian Financial Crisis," Working Papers 637, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:637
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    2. Mask, Joshua, 2023. "Salary history bans and healing scars from past recessions," Labour Economics, Elsevier, vol. 84(C).
    3. Elena-Loreni Baciu, 2022. "Employment Outcomes of Higher Education Graduates from during and after the 2007–2008 Financial Crisis: Evidence from a Romanian University," Sustainability, MDPI, vol. 14(18), pages 1-30, September.
    4. Joshua Mask, 2022. "How Increased Labor Demand at the Start of Your Career Can Improve Long Run Outcomes," DETU Working Papers 2201, Department of Economics, Temple University.
    5. Lucia Svabova & Eva Nahalkova Tesarova & Marek Durica & Lenka Strakova, 2021. "Evaluation of the impacts of the COVID-19 pandemic on the development of the unemployment rate in Slovakia: counterfactual before-after comparison," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(2), pages 261-284, June.

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    More about this item

    Keywords

    South Korea; college graduates; Korean Labor and Income Panel Study;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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