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Timing is Everything: Labor Market Winners and Losers during Boom-Bust Cycles

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Listed:
  • Katovich, Erik
  • Parker, Dominic
  • Poelhekke, Steven

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.

Suggested Citation

  • Katovich, Erik & Parker, Dominic & Poelhekke, Steven, 2023. "Timing is Everything: Labor Market Winners and Losers during Boom-Bust Cycles," CEPR Discussion Papers 17887, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:17887
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    More about this item

    Keywords

    Boom and bust cycles;

    JEL classification:

    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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