||The Effects of Graduating from College
during a Recession on Asset Holdings
||Daiji Kawaguchi and Ayako Kondo
||Recent studies reveal that graduating from college during a recession has persistent negative effects on labor-market outcomes - a phenomenon called the scarring effect. This study assesses the welfare impact of the scarring effect beyond labor market outcomes, by analyzing family formation behaviors and asset holdings. Scrutiny of National Longitudinal Survey of Youth 1979 reveals that, despite a substantial and persistent decline in hourly wages, business cycle conditions at entry to the labor market do not affect asset holdings in the long run; instead, young college graduates who face a recession at entry tend to move out of certain states, particularly from those states in the Northeast region where the cost of living is high. These results suggest that the cohort-specific negative shock is absorbed by the geographic mobility of college graduates; specifically, the scarred cohorts move to states with lower living costs to secure the same living standards as those of other cohorts.
||Scarring effect; business cycle; asset holding; cohort.
||Paper in English (29 pages)