Working Papers in Economics and Statistics,
Linnaeus University, School of Business and Economics, Department of Economics and Statistics

Abstract: We study how students adjust their early career choices in response to economic crises, and how this behavioral response affects their long-run labor market outcomes. We specifically examine the context of the severe recession that struck Sweden in the early 1990s, which disproportionally affected the manufacturing and construction sectors. We find that students who experienced paternal job loss in these heavily affected sectors were more likely to choose high school programs linked to sectors less impacted by the recession. These individuals achieved better labor market outcomes in adulthood, including higher employment rates and career earnings. Our findings are consistent with informational frictions being a key obstacle to structural change, and we identify career choice as an important mechanism through which recessions reshape labor markets in the very long run.

Keywords: High School Major; Recession; Information Frictions; Structural Change

JEL-codes: E32; I25; J24; J63

Language: English

58 pages, November 15, 2024

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