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Title: The Career Effects of Graduating from College in a Bad Economy: The Role of Workers’ Ability
Resulting in 1 citation.
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Mansour, Hani |
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The Career Effects of Graduating from College in a Bad Economy: The Role of Workers’ Ability Working Paper, University of Colorado-Denver and DIW Berlin, November 2009. Also: econ.ucdenver.edu/mansour/BC09.pdf Cohort(s): NLSY79 Publisher: University of Colorado-Denver Keyword(s): Career Patterns; Earnings; Economic Changes/Recession; Wage Dynamics Permission to reprint the abstract has not been received from the publisher. The literature on cohort effects, particularly the effects of graduating from college in a bad economy on wages, provide a wide range of estimates that vary both in magnitude and persistence. In this paper, I provide a simple explanation that reconciles the results in the literature. Using data from the NLSY79 and CPS ORG covering the graduating cohorts of 1979-1989 and 1979-1997, respectively, I provide evidence that workers who graduate from college during higher unemployment rates are positively selected from the ability distribution of college graduates. Consequently, not accounting for a measure of the worker’s ability underestimates the effects of higher unemployment rates at graduation on wages and weakens their persistence. The results from both data sets suggest that an increase of one percentage point in the unemployment rate induces a modest 2 percent wage loss that fades after 5 years. However, once I control for the worker’s AFQT score, the initial effect of wages becomes larger, about a 5 percent wage loss, and the effect remains as large even after 12-15 years into the worker’s career. I also show that starting a career in a recession has a signifi…cant adverse impact on the worker’s initial occupational wage. |
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Bibliography Citation
Mansour, Hani. "The Career Effects of Graduating from College in a Bad Economy: The Role of Workers’ Ability." Working Paper, University of Colorado-Denver and DIW Berlin, November 2009. |