American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers
American Economic Review
vol. 96,
no. 5, December 2006
(pp. 1679–1705)
Abstract
We examine administrative data on young German workers and their employers to study the long-term effects of an early career job loss. To account for nonrandom sorting of workers into firms with different turnover rates and for selective job mobility, we use changes over time in firm- and age-specific labor demand as an instrument for displacement. We find that wage losses of young job losers are initially 15 percent, but drop to zero within five years. Only workers leaving very large establishments suffer persistent losses. A comparison of estimators implies that initial sorting, negative selection, and voluntary job mobility biases ordinary least squares estimates toward finding permanent negative effects of early displacements. (JEL J13, J23, J24, J62, J63, M53)Citation
von Wachter, Till, and Stefan Bender. 2006. "In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers." American Economic Review, 96 (5): 1679–1705. DOI: 10.1257/aer.96.5.1679Additional Materials
JEL Classification
- J13 Fertility; Family Planning; Child Care; Children; Youth
- J23 Labor Demand
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J62 Job, Occupational, and Intergenerational Mobility; Promotion
- J63 Labor Turnover; Vacancies; Layoffs
- M53 Personnel Economics: Training