The Long-Term Effects of Youth Unemployment

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Citation

Mroz, Thomas A. & Savage, Timothy H. (2006). The Long-Term Effects of Youth Unemployment. Journal of Human Resources, 41(2), 259-293.

Abstract

Using NLSY data, we examine the long-term effects of youth unemployment on later labor market outcomes. Involuntary unemployment may yield suboptimal investments in human capital in the short run. A theoretical model of dynamic human capital investment predicts a rational "catch-up" response. Using semiparametric techniques to control for the endogeneity of prior behavior, our estimates provide strong evidence of this response. We also find evidence of persistence in unemployment. Combining our semiparametric estimates with a dynamic approximation to the lifecycle, we find that unemployment experienced as long ago as ten years continues to affect earnings adversely despite the catch-up response.

URL

http://dx.doi.org/10.3368/jhr.XLI.2.259

Reference Type

Journal Article

Year Published

2006

Journal Title

Journal of Human Resources

Author(s)

Mroz, Thomas A.
Savage, Timothy H.