Scars of Recessions in a Rigid Labor Market
42 Pages Posted: 20 Mar 2015
Date Written: March 19, 2015
We study the impact of graduating in a recession in Flanders (Belgium), i.e. in a rigid labor market. In the presence of a high minimum wage, a typical recession hardly influences the hourly wage of low educated men, but reduces working time and earnings by about 4.5% up to twelve years after graduation. For the high educated, the working time is not persistently affected, but the penalty on the hourly wage (and earnings) increases with experience, and attains roughly -6% ten years after labor market entry. We also contribute to the literature on inference with few clusters.
Keywords: scars, graduating, labor market rigidity, recession, few clusters, cluster robust
JEL Classification: C120, C410, E320, I210, J220, J230, J310, J600
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