DP17887 Timing is Everything: Labor Market Winners and Losers during Boom-Bust Cycles
Sectoral expansions and contractions cause labor reallocation out of declining industries and into booming industries. Which types of workers gain and lose from these transitions? Using linked employer-employee panel data from Brazil spanning boom-bust cycles in its oil sector, we compare oil entrants with closely matched workers hired into other sectors in the same year. We find that entry timing interacts with worker skill in ways that have lasting effects. Only highly educated workers hired into oil at the onset of a boom reap persistent earnings premiums across the boom-bust cycle. For most later entrants, especially low-education workers, the decision to enter the oil industry results in persistent unemployment and earnings penalties. We document mechanisms underlying this first-in, last-out pattern. Accumulated experience in professional occupations insulates high-education early entrants from downturns, while a boom in sector-specific training programs intensifies competition among later entrants. We discuss implications for energy transitions.
