Abstract:

I investigate medium- and long-term impacts of the Great Recession on post-recession college graduates. Most “scarring” models emphasize effects of initial conditions that attenuate over the first decade of a worker’s career. But early career recessions may also have permanent effects. I decompose the recent cohorts’ experience into transitory time effects, medium-term scarring, and permanent cohort effects. Cohort effects are strongly cyclical. Medium-term scarring explains only half of this cyclicality. The long-run cumulative effect of the recession on graduates’ employment is more than twice as large as the immediate effect.