The Early Career Dynamics of Informality and Underemployment

This paper studies the early career dynamics of employment and formality using data from the Arab Republic of Egypt. With 14 rounds of Egypt's labor force surveys several measures of informality and underemployment are constructed to examine how the labor market conditions faced by young men when they exit school shape their future employment trajectories. Employment outcomes at different levels of potential experience are linked to cross-cohort, cross-regional and cross-schooling level variation in labor market conditions at graduation to achieve identification. The results show that cohorts of Egyptian men who enter a labor market in which employment rates are high (low) are only better (worse) off for a few years. These fast mean reversals stand in contrast to the typical finding from rich countries that scarring effects persist through the first decade of a worker's career