Make your own luck: The wage gains from starting college in a bad economy

Alena Bičáková, Guido Matias Cortes, Jacopo Mazza

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Using data for nearly 40 cohorts of American college graduates and exploiting regional variation in economic conditions, we show robust evidence of a positive relationship between the unemployment rate at the time of college enrollment and subsequent annual earnings, particularly for women. This positive relationship is not driven by selection into employment or by economic conditions at the time of labor market entry. It also cannot be explained by differential sorting into college majors or post-graduate education. Up to one third of the effect is accounted for by sorting towards more remunerative locations. The results are consistent with a behavioral change that induces individuals who experience bad economic times at the beginning of their studies to exert more effort toward obtaining higher paying jobs.

Original languageEnglish
Article number102411
Pages (from-to)1-14
Number of pages14
JournalLabour Economics
Volume84
DOIs
Publication statusPublished - Oct 2023

Bibliographical note

Funding Information:
Bičáková thanks the NPO “Systemic Risk Institute” number LX22NPO5101, funded by European Union - Next Generation EU (Ministry of Education, Youth and Sports, NPO: EXCELES) for financial support. Cortes thanks the Social Sciences and Humanities Research Council of Canada for support through grant 435-2018-0280. We thank Nikolas Mittag and various seminar and conference participants for very helpful comments and suggestions. CERGE-EI is a joint workplace of the Center for Economic Research and Graduate Education, Charles University and the Economics Institute of the Czech Academy of Sciences, Politickych veznu 7, PO Box 882, 111 21 Prague 1, Czech Republic.

Funding Information:
Bičáková thanks the NPO “Systemic Risk Institute” number LX22NPO5101, funded by European Union - Next Generation EU (Ministry of Education, Youth and Sports, NPO: EXCELES) for financial support. Cortes thanks the Social Sciences and Humanities Research Council of Canada for support through grant 435-2018-0280. We thank Nikolas Mittag and various seminar and conference participants for very helpful comments and suggestions. CERGE-EI is a joint workplace of the Center for Economic Research and Graduate Education, Charles University and the Economics Institute of the Czech Academy of Sciences, Politickych veznu 7, PO Box 882, 111 21 Prague 1, Czech Republic.

Publisher Copyright:
© 2023 Elsevier B.V.

Keywords

  • Business cycle
  • Cohort effects
  • Higher education

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