Graduation During Recession and Labor Market Outcomes of Young Adults in South Korea

This study examines the effects of graduation during recession on labor market outcomes among young adults in South Korea. Results using data from the 1998-2019 Korean Labor and Income Panel Study show that a higher youth unemployment rate at graduation is likely to decrease entry earnings, the likelihood of employment at the year of graduation, full-time and permanent employment in the first job, and life-time labor force participation. We also find that youth unemployment rate at the first year of employment leads to delay in the first employment, the first full-time, and permanent employment. The 2SLS and nonparametric kernel IV estimations uniformly show that lower entry earnings leads to lower post earnings up to 10 years. As this relationship is partly attributed by unobserved random component of entry earnings, institutional supports are warranted to recuperate initial misfortune of recession cohorts.