Heterogeneous scars in later life: The economic impact of early labour market opportunities

I analyse the heterogeneous effects of labour market opportunities at education completion on end-of-career outcomes. I use data on European individuals who completed education between 1963 and 1982, observing their outcomes beyond age 50. Using standard econometric models and machine learning, I find that poor initial opportunities have lasting effects. Economic downturns have a non-linear impact: missing good opportunities harms more than avoiding bad ones. Effects are stronger for less-educated and low socioeconomic individuals. Women face permanent reductions in labour market participation. I examine explanatory channels over the lifecycle, showing how initial opportunities shape human capital trajectories. • Early labour market opportunities have lasting effects on outcomes beyond age 50. • Economic downturns have a non-linear impact; missing good opportunities harms most. • Effects are strongest for less-educated and low socioeconomic individuals. • Women face permanent reductions in labour market participation. • Initial shocks shape human capital, leading to lower cognitive ability later in life.