Long-Term Effects of a Recession at Labor Market Entry in Japan and the United States
Long-Term Effects of a Recession at Labor Market Entry in Japan and the United States
by Yuji Genda (University of Tokyo) , Ayako Kondo, and Souichi Ohta (Keio University)
This paper examines effects of entering the labor market during a recession on subsequent earnings and employment for Japanese and American men, using comparable household labor force surveys. Previous analyses focus on search theoretic and implicit-contract arguments, which have their strongest effects on more educated workers. The authors argue that, in a country like Japan which has a dual labor market, there is an additional mechanism that affects mainly less educated workers. Namely, these workers are more likely to be trapped in the secondary sector if they graduate during a recession. We find a persistent, strong negative effect on earnings for less educated Japanese men, in contrast to no long-term effect for less educated American men; also, a substantial part of the effect for less educated Japanese men is attributed to the decreased probability of regular employment. The effect for the more educated group is more or less similar in both countries.
