Persistence in Labor Supply Effects of Graduating in a Recession: The Case of High School Women

Brad Hershbein, University of Michigan

This paper explores the impact of graduating high school during an economic recession on the labor supply of women. I develop a simple, dynamic choice model that allows an initial labor demand shock to have persistent effects on labor supply. I then test the implications of the model using the National Longitudinal Survey of Youth, 1979. For identification, I exploit both temporal and spatial variation in initial labor market conditions by using the national, state and in some specifications, metropolitan area unemployment rates. The results support the hypothesis that women who graduate during a period of high unemployment reduce their labor supply in the short run, with suggestive evidence that they instead substitute into earlier family formation. In contrast with previous studies that have found persistent, negative wage effects to graduating in a recession among college-educated men, I find no significant impact on wages in my sample.