Ability Matters: Effects of Youth Labor-Market Opportunities on Long-Term Labor-Market Outcomes

Abstract

Utilizing registry data from cognitive ability tests for all Norwegian males born between 1962 and 1973, I study whether labor-market conditions at the age of graduation have differential effects on earnings and employment for different ability groups. I find that low-ability males are more vulnerable to local business cycles at the expected time of labor-market entry. In particular, I demonstrate that low-ability males suffer larger long-term earnings losses than the rest of the population.