COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1889 Career Progression, Economic Downturns, and Skills Jerome Adda, Christian Dustmann, Costas Meghir, and Jean-Marc Robin February 2013 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. |
