Scars of Recessions in a Rigid Labor Market

43 Pages Posted: 16 Mar 2015

See all articles by Bart Cockx

Bart Cockx

Ghent University - Sherppa - Faculty of Economics and Business Administration; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute); IRES, Université Catholique de Louvain

Corinna Ghirelli

Bank of Spain

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Abstract

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: C12, C41, E32, I21, J22, J23, J31, J6

Suggested Citation

Cockx, Bart L. W. and Ghirelli, Corinna, Scars of Recessions in a Rigid Labor Market. IZA Discussion Paper No. 8889, Available at SSRN: https://ssrn.com/abstract=2578241 or http://dx.doi.org/10.2139/ssrn.2578241

Bart L. W. Cockx (Contact Author)

Ghent University - Sherppa - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Institute for the Study of Labor (IZA)

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IRES, Université Catholique de Louvain

Place Montesquieu, 3
Louvain-la-Neuve
Belgium

Corinna Ghirelli

Bank of Spain ( email )

Calle Alcala, 48
Madrid, 28014
Spain

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