Early Labor Market Prospects and Family Formation

Abstract

Using quasi-random variation in graduation years of Swedish vocational high school females at the sudden onset of a deep national recession, we study how deteriorated early labor market prospects affected economic and family outcomes during the following decades. Labor market consequences were severe but not permanent. In contrast, family outcomes were permanently altered, in particular for low-GPA women. These women married and had children earlier, and they partnered with lower-performing spouses. Divorce and single-motherhood rates rose, and welfare claims remained elevated for decades. This suggests that temporary shocks to female labor market prospects can propagate into long-run poverty through endogenous adjustments of marriage-quality thresholds.