Good Skills in Bad Times: Cyclical Skill Mismatch and the Long-Term Effects of Graduating in a Recession

46 Pages Posted: 25 Aug 2012

See all articles by Kai Liu

Kai Liu

Norwegian School of Economics (NHH)

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics; IZA Institute of Labor Economics

Erik Sorensen

Norwegian School of Economics (NHH) - Department of Economics

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Date Written: August 2012

Abstract

We show that cyclical skill mismatch, defined as mismatch between the skills supplied by college graduates and skills demanded by hiring industries, is an important mechanism behind persistent career loss from graduating in recessions. Using Norwegian data, we find a strong countercyclical pattern of skill mismatch among college graduates. Initial labor market conditions have a declining but persistent effect on the probability of mismatch early in their careers. We provide a simple model of industry mobility that is consistent with our empirical findings. The initially mismatched graduates are also more vulnerable to business cycle variations at the time of graduation.

JEL Classification: E32, J31, J62

Suggested Citation

Liu, Kai and Salvanes, Kjell G. and Sorensen, Erik, Good Skills in Bad Times: Cyclical Skill Mismatch and the Long-Term Effects of Graduating in a Recession (August 2012). NHH Dept. of Economics Discussion Paper No. 16/2012. Available at SSRN: https://ssrn.com/abstract=2135543 or http://dx.doi.org/10.2139/ssrn.2135543

Kai Liu (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen
Norway

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 5 595 9315 (Phone)
+47 5 595 9543 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Erik Sorensen

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway

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