RT Journal Article
SR Electronic
T1 The Long-Term Effects of Youth Unemployment
JF Journal of Human Resources
JO J Hum Resour
FD University of Wisconsin Press
SP 259
OP 293
DO 10.3368/jhr.XLI.2.259
VO XLI
IS 2
A1 Mroz, Thomas A.
A1 Savage, Timothy H.
YR 2006
UL http://jhr.uwpress.org/content/XLI/2/259.abstract
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.