Working Paper: NBER ID: w26638
Authors: Hannes Schwandt; Till M. von Wachter
Abstract: This paper uses several large cross-sectional data sources and a new approach to show that a large and recurring temporary economic shock affecting young adults– entering the labor market in a recession – has dynamic effects on mortality by cause, family outcomes, morbidity, and various measures of economic success throughout the life-cycle until middle age. We find that cohorts coming of age during the deep recession of the early 1980s suffer increases in mortality that appear in their late 30s and further strengthen through age 50, driven by behavior-related causes such as heart disease, lung cancer, and liver disease, as well as drug overdoses. At the same time, unlucky middle-aged labor market entrants earn less and work more while receiving less welfare support and experiencing higher rates of work-related disability. They are also less likely to be married, more likely to be divorced, experience higher rates of childlessness, and have lower income spouses. We show the entire trajectories of these outcomes are affected in a way predicted by economic life-cycle models. This implies long-lasting and costly effects for the large number of individuals graduating in recessions.
Keywords: recession; labor market; mortality; socioeconomic outcomes; young adults
JEL Codes: E32; I10; J10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Entering the labor market during a recession (J49) | Increased mortality rates (I12) |
| Entering the labor market during a recession (J49) | Lower long-term earnings (G19) |
| Increased mortality rates (I12) | Behavior-related causes (heart disease, lung cancer, liver disease, drug overdoses) (I12) |
| Entering the labor market during a recession (J49) | Higher rates of work-related disability (J28) |
| Entering the labor market during a recession (J49) | Lower marriage rates (J12) |
| Entering the labor market during a recession (J49) | Higher divorce rates (J12) |
| Entering the labor market during a recession (J49) | Smaller family sizes (J12) |