The increasing unemployment gap between the low and high educated in West Germany: structural or cyclical crowding-out?

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Abstract

This paper addresses trends in education-specific unemployment risks at labor market entry in West Germany from the mid-1970s to the present. In line with previous research it shows that vocationally qualified school-leavers have relatively lower unemployment risks than school-leavers with general education. Over time, the gap in unemployment risks between the low-educated and medium- and highly educated labor market entrants substantially widened for both sexes. The literature identifies two different mechanisms for this trend: structural or cyclical crowding out. While in the former scenario low-educated become increasingly unemployed due to an oversupply of tertiary graduates and displacement from above, in the latter their relative unemployment risk varies with the business cycle. The results provide evidence for cyclical rather than structural crowding-out in West Germany. Since macroeconomic conditions became generally worse over time, this strongly explains the widening unemployment gap between the low-educated and all other education groups.

LanguageEnglish
Pages110-125
Number of pages16
JournalSocial Science Research
Volume50
Early online date27 Nov 2014
DOIs
StatePublished - 1 Mar 2015

Fingerprint

crowding out
unemployment
Federal Republic of Germany
labor market
group education
opening up of markets
business cycle
general education
trend
school
macroeconomics
graduate
scenario
present
evidence
education

Keywords

  • returns to education
  • unemployment
  • low-educated
  • crowding out
  • fixed effects

Cite this

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title = "The increasing unemployment gap between the low and high educated in West Germany: structural or cyclical crowding-out?",
abstract = "This paper addresses trends in education-specific unemployment risks at labor market entry in West Germany from the mid-1970s to the present. In line with previous research it shows that vocationally qualified school-leavers have relatively lower unemployment risks than school-leavers with general education. Over time, the gap in unemployment risks between the low-educated and medium- and highly educated labor market entrants substantially widened for both sexes. The literature identifies two different mechanisms for this trend: structural or cyclical crowding out. While in the former scenario low-educated become increasingly unemployed due to an oversupply of tertiary graduates and displacement from above, in the latter their relative unemployment risk varies with the business cycle. The results provide evidence for cyclical rather than structural crowding-out in West Germany. Since macroeconomic conditions became generally worse over time, this strongly explains the widening unemployment gap between the low-educated and all other education groups.",
keywords = "returns to education, unemployment, low-educated, crowding out, fixed effects",
author = "Markus Klein",
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T1 - The increasing unemployment gap between the low and high educated in West Germany

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AU - Klein,Markus

N1 - Copyright © 2014 Elsevier Inc. All rights reserved.

PY - 2015/3/1

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N2 - This paper addresses trends in education-specific unemployment risks at labor market entry in West Germany from the mid-1970s to the present. In line with previous research it shows that vocationally qualified school-leavers have relatively lower unemployment risks than school-leavers with general education. Over time, the gap in unemployment risks between the low-educated and medium- and highly educated labor market entrants substantially widened for both sexes. The literature identifies two different mechanisms for this trend: structural or cyclical crowding out. While in the former scenario low-educated become increasingly unemployed due to an oversupply of tertiary graduates and displacement from above, in the latter their relative unemployment risk varies with the business cycle. The results provide evidence for cyclical rather than structural crowding-out in West Germany. Since macroeconomic conditions became generally worse over time, this strongly explains the widening unemployment gap between the low-educated and all other education groups.

AB - This paper addresses trends in education-specific unemployment risks at labor market entry in West Germany from the mid-1970s to the present. In line with previous research it shows that vocationally qualified school-leavers have relatively lower unemployment risks than school-leavers with general education. Over time, the gap in unemployment risks between the low-educated and medium- and highly educated labor market entrants substantially widened for both sexes. The literature identifies two different mechanisms for this trend: structural or cyclical crowding out. While in the former scenario low-educated become increasingly unemployed due to an oversupply of tertiary graduates and displacement from above, in the latter their relative unemployment risk varies with the business cycle. The results provide evidence for cyclical rather than structural crowding-out in West Germany. Since macroeconomic conditions became generally worse over time, this strongly explains the widening unemployment gap between the low-educated and all other education groups.

KW - returns to education

KW - unemployment

KW - low-educated

KW - crowding out

KW - fixed effects

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