Unemployment and subsequent earnings for Swedish college graduates: A study of scarring effects

Unemployment immediately upon graduation is associated with substantial and permanent future earnings losses. Even for very short unemployment spells the estimated earnings losses are statistically significant. These results are stable for the inclusion of a rich set of observable control variables, including grade point average from high school and parental educational level, and for choice of method i.e. OLS and propensity score matching. This lends some support for the interpretation that unemployment upon graduation has the causal effect of reducing future earnings prospects.