The scarring effect of early non-employment

Corinna Ghirelli

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper investigates whether early non-employment has a causal impact on workers' subsequent career. The analysis is based on a sample of low educated youth graduating in Belgium between 1994 and 2002. To correct for selective incidence of non-employment, we instrument early non-employment by the provincial unemployment rate at graduation. Since the instrument is clustered at the province-graduation year level and the number of clusters is small, inference is based on wild bootstrap methods. We _nd that one percentage point increase in the proportion of time spent in non-employment during the _rst two and a half years of the career decreases six years after graduation annual earnings from salaried employment by 10% and annual hours worked by 7%.

Keywords: youth unemployment; scars; instrumental variable; wild bootstrap (search for similar items in EconPapers)
JEL-codes: J31 J64 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2014-12
New Economics Papers: this item is included in nep-eur and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:14/895

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