Early Life Circumstances and Life Cycle Labor Market Outcomes

65 Pages Posted: 15 Jul 2015  

Manuel Flores

Organization for Economic Co-Operation and Development (OECD)

Pilar Garcia-Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Adriaan Kalwij

Utrecht University

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Date Written: July 4, 2015

Abstract

We investigate how early life circumstances — childhood health and socioeconomic status (SES) — are associated with labor market outcomes over an individual’s entire life cycle. A life cycle approach provides insights not only into which labor market outcomes are associated with adverse childhood events but also into whether these associations show up early or only later in working life, and whether they vanish or persist over the life cycle. The analysis is conducted using the Survey of Health, Aging and Retirement in Europe, which contains retrospective information on early life circumstances and full work histories for over 20,000 individuals in thirteen European countries. We find that the associations between early life circumstances and (accumulated) labor market outcomes vary over an individual’s life cycle. For men and women, the effect of childhood SES on lifetime earnings accumulates over the life cycle through the associations with both working years and annual earnings. Moreover, for men this association with lifetime earnings reverses sign from negative to positive over their working life. We also find a smaller, positive long-term association between childhood health and lifetime earnings operating mainly through annual earnings and only to a lesser extent through working years, and which is not present at the beginning of the working life for women. Most of these life cycle profiles differ between European country-groups. Finally, for women we find a so-called buffering effect, i.e. that a higher parental SES reduces the negative impact of poor health during childhood on accumulated earnings over the life cycle.

Keywords: Early life circumstances, lifetime earnings, life cycle, SHARE

JEL Classification: D10, I14, J14, J24, J31, O15

Suggested Citation

Flores, Manuel and Garcia-Gomez, Pilar and Kalwij, Adriaan, Early Life Circumstances and Life Cycle Labor Market Outcomes (July 4, 2015). Netspar Discussion Paper No. 07/2015-011. Available at SSRN: https://ssrn.com/abstract=2630968 or http://dx.doi.org/10.2139/ssrn.2630968

Manuel Flores

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Pilar Garcia Gomez

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Adriaan Kalwij (Contact Author)

Utrecht University ( email )

Janskerkhof 12
Utrecht, 3512 BL
Netherlands

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