Working Paper: NBER ID: w18832
Authors: Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin
Abstract: This paper analyzes the career progression of skilled and unskilled workers, with a focus on how careers are affected by economic downturns and whether formal skills, acquired early on, can shield workers from the effect of recessions. Using detailed administrative data for Germany for numerous birth cohorts across different regions, we follow workers from labor market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labor supply, and wage progression. Most particularly, our model allows for labor market frictions that vary by skill group and over the business cycle. We find that sources of wage growth differ: learning-by-doing is an important component for unskilled workers early on in their careers, while job mobility is important for workers who acquire skills in an apprenticeship scheme before labor market entry. Likewise, economic downturns affect skill groups through very different channels: unskilled workers lose out from a decline in productivity and human capital, whereas skilled individuals suffer mainly from a lack of mobility.
Keywords: career progression; economic downturns; vocational training; skills; labor market
JEL Codes: C15; C23; C33; I24; J01; J08; J22; J24; J3; J31; J6; J62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic downturns (F44) | job destruction rates for unskilled workers (F66) |
| job destruction rates for unskilled workers (F66) | permanent reductions in human capital (J24) |
| permanent reductions in human capital (J24) | long-lasting wage reductions (J31) |
| economic downturns (F44) | wage reductions for unskilled workers (F66) |
| economic downturns (F44) | lack of mobility for skilled workers (J61) |
| lack of mobility for skilled workers (J61) | mitigated negative effects on wages (F66) |
| initial choice to enroll in vocational training (J24) | influences career trajectories (J62) |
| economic shocks (F69) | heterogeneous effects on career progression (J62) |