Does Graduating during Adverse Labor Market Conditions Leave a Scar?

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 12.11.2013, 12:15 - 13:30


Presentation by 

Bart Cockx (Ghent University)


Did the ‘Great Recession’ in 2008 really result in a ‘lost generation’? Does graduating during adverse labour market conditions leave a scar on labour market outcomes? Scientific evidence is mixed. The degree of persistence seems to depend on the level of education and on the institutional environment. We study this issue based on representative sample of 3624 men born in 1976, 1978 or 1980 who graduated between 1994 and 2004 in Flanders, prosperous region in the North of Belgium characterized by high minimum wages and generally strict employment protection. We contribute methodologically by proposing a novel efficient Minimum Distance (MD) estimator that takes both the estimation error of group averages and the cross-sectional and serial dependence in unobserved group effects into account. We also innovate by considering self-employment, in addition to more standard labour market outcomes, such as salaried work, hourly wages and yearly number of hours worked. We find little evidence of persistent penalties at first sight. However, this is apparent, since it conceals substitution of false (?) self-employed for salaried work, and since different patterns are observed for high and low educated.

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