Publication Date: February 2013
This paper analyzes the career progression of skilled and unskilled workers, with a focus on how careers are aﬀected by economic downturns and whether formal skills, acquired early on, can shield workers from the eﬀect of recessions. Using detailed administrative data for Germany for numerous birth cohorts across diﬀerent regions, we follow workers from labor market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labor supply, and wage progression. Most particularly, our model allows for labor market frictions that vary by skill group and over the business cycle. We ﬁnd that sources of wage growth diﬀer: learning-by-doing is an important component for unskilled workers early on in their careers, while job mobility is important for workers who acquire skills in an apprenticeship scheme before labor market entry. Likewise, economic downturns aﬀect skill groups through very diﬀerent channels: unskilled workers lose out from a decline in productivity and human capital, whereas skilled individuals suﬀer mainly from a lack of mobility.
Wage determination, Skills, Business cycles, Apprenticeship Training, Job Mobility, Human Capital
JEL Classification Codes: J24, J31, J62, J63, I24