DP17887 Timing is Everything: Labor Market Winners and Losers during Boom-Bust Cycles

• Erik Katovich Dominic Parker Steven Poelhekke
7 Feb 2023

Sectoral expansions and contractions require labor reallocation between declining and booming sectors. Which types of workers gain and lose during these transitions? Using linked employer-employee panel data from Brazil spanning a boom-bust cycle in its oil and gas sector, we find that timing of labor market entry is critical. Only highly educated workers hired at the onset of a boom reap significant earnings and employment benefits. Low-education workers and later entrants experience earnings and employment penalties, reflecting a last-in, first-out pattern. We show the boom induced rapid growth in sector-specific education and a mistimed glut of specialized graduates, dissipating earnings.