Working Paper: CEPR ID: DP17887
Authors: Erik Katovich; Dominic Parker; Steven Poelhekke
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; labor reallocation; human capital; inequality; energy transition
JEL Codes: Q33; J24; J31; I24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| timing of labor market entry (J29) | individual labor market outcomes (J49) |
| highly educated workers hired at the onset of a boom (J24) | significant earnings and employment benefits (J68) |
| low-education workers and later entrants (J79) | earnings and employment penalties (J68) |
| timing of entry into the oil industry (L71) | consequences for individual labor market outcomes (J79) |
| educational attainment (I21) | moderates negative effects for later cohorts (D15) |
| low-education workers (J69) | negative earnings effects across all cohorts (J79) |
| negative earnings effects (G35) | exacerbated during bust periods (E32) |