This paper uses UK administrative data to study the long-term effects of unemployment on earnings. It is the first paper to pinpoint accurately the relative importance of the timing of employment shocks within workers’ lives. We find a strong effect of events in the first few years after entry into the labour market: each month of unemployment between ages 18 and 20 causes a permanent income loss of 1.2% per year. This scar effect of youth unemployment is lower when it happens when the worker’s age is between 21 and 23, and it disappears altogether in the next three-year age period. The scar effect is most severe for individuals at the lower end of the ability distribution.
|Number of pages||46|
|Early online date||4 Aug 2021|
|Publication status||Published - Oct 2021|
Bibliographical noteFunding Information:
We would like to thank Martin Foreaux-Koppensteiner, Andrea Ichino, Jesse Matheson, Giovanni Pica, Till von Wachter, the editor Steve Machin, three anonymous referees and seminar participants at CHERE UTS Sydney, Leicester, UNNC Ningbo, York, and the ECB labour market conference, Frankfurt.
© 2021 The London School of Economics and Political Science
ASJC Scopus subject areas
- Economics and Econometrics