Scarring Effects of Early Unemployment among Young Workers with Vocational Credentials in Switzerland

Background Using a unique, longitudinal survey that follows school-to-work transitions of pupils who participated in PISA 2000, this paper investigates adverse consequences, so-called scarring effects, of early unemployment among young adults who acquired vocational credentials in Switzerland. Methods As social, individual and contextual factors influence both early unemployment and later employment outcomes, taking into account endogeneity is of utmost importance when investigating scarring effects. In this regard we make use of nearest-neighbour propensity score matching and set up statistical control groups. Results Our results suggest that young adults who hold vocational credentials are more likely to be neither in employment nor in education, and to earn less and be more dissatisfied with their career progress later in work life than they would be, had they not experienced early unemployment. Conclusions We conclude that unemployment scarring also affects young adults with vocational credentials in a liberal labour market setting that otherwise allows for smooth school-to-work transitions. This finding runs counter to expectations that standardised vocational degrees, a liberal and flexible labour market structure, and predominantly short unemployment spells protect young skilled workers from scarring in case they happen to experience early career instability.

Corporate aging and investment decisions

Paper I: Corporate aging and internal resource allocation Abstract Various observers argue that established firms are at a disadvantage in pursuing new growth opportunities. In this paper, we provide systematic evidence that established firms allocate fewer resources to high-growth lines of business. However, we find no evidence of inefficient resource allocation in established firms. Redirecting resources from high-growth to low-growth lines of business does not result in lower profitability. Also, resource allocation towards new growth opportunities does not increase when managers of established firms are exposed to takeover and product market threats. Rather, it seems that conservative resource allocation strategies are driven by pressures to meet investors’ expectations. Our empirical evidence, thus, favors the hypothesis that established firms wisely choose to allocate fewer resources to new growth opportunities as external pressures force them to focus on efficiency rather than novelty (Holmström 1989). Paper II: Corporate aging and asset sales Abstract This paper asks whether divestitures are motivated by strategic considerations about the scope of the firm’s activities. Limited managerial capacity implies that exploiting core competences becomes comparatively more attractive than exploring new growth opportunities as firms mature. Divestitures help stablished firms free management time and increase the focus on core competences. The testable implication of this attention hypothesis is that established firms are the main sellers of assets, that their divestiture activity increases when managerial capacity is scarcer, that they sell non-core activities, and that they return the divestiture proceeds to the providers of capital instead of reinvesting them in the firm. We find strong empirical support for these predictions. Paper III: Corporate aging and lobbying expenditures Abstract Creative destruction forces constantly challenge established firms, especially in competitive markets. This paper asks whether corporate lobbying is a competitive weapon of established firms to counteract the decline in rents over time. We find a statistically and economically significant positive relation between firm age and lobbying expenditures. Moreover, the documented age-effect is weaker when firms have unique products or operate in concentrated product markets. To address endogeneity, we use industry distress as an exogenous nonlegislative shock to future rents and show that established firms are relatively more likely to lobby when in distress. Finally, we provide empirical evidence that corporate lobbying efforts by established firms forestall the creative destruction process. In sum, our findings suggest that corporate lobbying is a competitive weapon of established firms to retain profitability in competitive environments.