Human Capital and Skill Specificity
This paper examines whether local labor market conditions at the time of high school graduation have long-term effects on wages. We find that a higher unemployment rate raises the probability of staying in school after finishing high school of white males, but reduces that of black males. A higher unemployment rate is also found to have a negative and lasting impact on the wages of white males who directly enter the workforce after graduating from high school. The main impetus of these lower wages is a tendency to accumulate less experience over the same time horizon. Thus, for most individuals graduating during a recession represents bad luck. However, for some the forced opportunity of additional years of education results in higher earnings levels.
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