PT  - JOURNAL ARTICLE
AU  - Thomas A. Mroz
AU  - Timothy H. Savage
TI  - The Long-Term Effects of Youth Unemployment
AID  - 10.3368/jhr.XLI.2.259
DP  - 2006 Mar 31
TA  - Journal of Human Resources
PG  - 259--293
VI  - XLI
IP  - 2
4099  - http://jhr.uwpress.org/content/XLI/2/259.short
4100  - http://jhr.uwpress.org/content/XLI/2/259.full
SO  - J Hum Resour2006 Mar 31; XLI
AB  - 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.