The impact of a missing school graduation cohort on the training market

This study analyzes whether the training market responds to a reduced supply of trainees by decreasing the number of hired trainees and increasing their wages based on administrative data. The empirical identification uses exogenous regional and time variation in the occurrence of a missing school graduation cohort that shifts the supply of potential trainees downwards. The results show that the missing cohort decreases new hires by 10 % and raises wages by 1 %. Further robustness results reveal that the opposite case of excess supply (that is caused by dual cohorts) increases hirings and decreases wages. Our results also document that high and low wage firms respond differently to the supply shocks. While only high wage firms stop hiring when labor supply decreases, it is the low wage firms who hire a larger number of trainees in case of excess supply.