Early career effects of entering the labor market during higher education expansion

Abstract We evaluate the labor market effects of an increasing supply of high-skilled labor, resulting from a higher education expansion at established German universities. Exploiting variation in exposure across regions and cohorts, we estimate early career effects for labor market entrants. We find that high-skilled wages decline initially, particularly in non-graduate jobs, but recover over the first 5 years of experience. For graduate job takers, we even report positive wage effects after 5 years. We explain the dynamics of the effects by the interplay of several mechanisms: immediate supply effects, recovery through regional mobility, and increased productivity of graduate jobs.