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Research ArticleArticles

The Long-Term Effects of Youth Unemployment

Thomas A. Mroz and Timothy H. Savage
Journal of Human Resources, March 2006, XLI (2) 259-293; DOI: https://doi.org/10.3368/jhr.XLI.2.259
Thomas A. Mroz
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Timothy H. Savage
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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.

  • Received July 2004.
  • Accepted August 2005.

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Journal of Human Resources
Vol. XLI, Issue 2
31 Mar 2006
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The Long-Term Effects of Youth Unemployment
Thomas A. Mroz, Timothy H. Savage
Journal of Human Resources Mar 2006, XLI (2) 259-293; DOI: 10.3368/jhr.XLI.2.259

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The Long-Term Effects of Youth Unemployment
Thomas A. Mroz, Timothy H. Savage
Journal of Human Resources Mar 2006, XLI (2) 259-293; DOI: 10.3368/jhr.XLI.2.259
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