Timing is Everything: Labor Market Winners and Losers during Boom-Bust Cycles

Erik Katovich, Dominic Parker and Steven Poelhekke

No 17887, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Sectoral expansions and contractions require labor reallocation out of declining industries and into booming industries. Which types of workers gain and lose during these transitions? Using linked employer-employee panel data from Brazil spanning a full boom-bust cycle in its oil and gas sector, we find that timing of labor market entry is critical. Only highly educated workers hired into oil at the onset of a boom reap significant earnings and employment benefits. Low-education workers and later entrants constitute firms' margin of adjustment during busts. These workers experience persistent earnings and employment penalties, reflecting a last-in, first-out pattern. We document mechanisms driving these between-cohort and within-cohort inequalities. Accumulated experience in professional occupations insulates high-education early entrants from downturns, while a boom in sector-specific education erodes earnings of later entrants. We discuss implications for workers during the energy transition.

Keywords: Boom; and; bust; cycles (search for similar items in EconPapers)
JEL-codes: Q33 (search for similar items in EconPapers)
Date: 2023-02
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