How Early Career Choices Adjust to Economic Crises

Julien Grenet (), Hans Grönqvist, Edvin Hertegård (), Martin Nybom and Jan Stuhler
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Julien Grenet: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Edvin Hertegård: Stockholm University

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Abstract: We study how students adjust their early career choices in response to economic crises, and how this behavioral response affects their long-run labor market outcomes. We specifically examine the context of the severe recession that struck Sweden in the early 1990s, which disproportionally affected the manufacturing and construction sectors. We find that students who experienced paternal job loss in these heavily affected sectors were more likely to choose high school programs linked to sectors less impacted by the recession. As a result, these individuals achieved better labor market outcomes in adulthood, including higher employment rates and career earnings. Our findings are consistent with informational frictions being a key obstacle to structural change, and we identify career choice as an important mechanism through which recessions reshape labor markets in the very long run.

Keywords: High School Major; Recession; Information Frictions; Structural Change High School Major; Structural Change (search for similar items in EconPapers)
Date: 2024-02
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04431902
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