%0 Report
        %A Arellano-Bover, Jaime
        %T The Effect of Labor Market Conditions at Entry on Workers' Long-Term Skills
        %D 2020
        %8 2020 Apr
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 13129
        %U https://www.iza.org/publications/dp13129
        %X This paper studies the impact of labor market conditions during the education-to-work transition on workers' long-term skill development. Using representative survey data on measures of work-relevant cognitive skills for adults from 19 countries, I document four main findings: i) cohorts of workers who faced higher unemployment rates at ages 18–25 have lower skills at ages 36–59; ii) unemployment rates faced at later ages (26–35) do not have such an effect; iii) the former findings hold even though, on average, people get more formal education as a response to higher unemployment in their late teens and early twenties; iv) skill inequality is affected: workers whose parents were less educated bear most of the negative effects. 
These findings can be rationalized by on-the-job learning during the early twenties being an important factor of skill-development, and such learning being negatively impacted by bad macroeconomic conditions. Using German panel data on skills, I show that young workers at large firms experience higher skill growth than those at small firms. This finding suggests firm heterogeneity in human capital provision to young workers as a potential mechanism since, in bad economic times, young workers disproportionately match with small firms.
        %K on-the-job learning
%K labor market entry
%K macroeconomic conditions
%K measures of skills
%K cognitive skills
%K firms