The heterogenous effects of initial labor market conditions on entrants' careers across types of colleges

Abstract

In this paper, the effects of entering the labor market during the Asian financial crisis on the labor market outcomes for vocationally oriented college and academically oriented college graduates were analyzed. Using panel data on South Korea, it was found that adverse economic shock significantly affects the labor market outcomes for academically oriented college graduates after graduation. Specifically, male graduates from academically oriented colleges experienced severe and persistent wage and employment losses. Vocationally oriented college graduates did not experience significant employment or wage problems during the recession. Finally, graduates from prestigious colleges can offset their wage loss due to adverse economic shock through the wage premia of college prestige. College prestige can alleviate the negative effects of the recession on graduates’ wages. The findings suggest that graduates during a recession, depending on their college type, experience different paths of labor market outcomes in the years after their college graduation.