Starting on the right track? The effects of rst job experience on short and long term labor market outcomes

For young job seekers barriers to labor market entry are high, especially in developing countries were information frictions are large. Can first job experience impact such barriers and have perdurable effects? This paper exploits a large-scale youth employment program in Argentina that randomly allocated 12-months wage subsidizes to investigate what were the effects of (relatively) high quality entry-level jobs on short and long terms labor market outcomes of the youth. Short and long term (4.5 years after) outcomes are measured with data gathered both from administrative registries and a follow-up survey. Working in a formal firm caused large short and long run gains in the probability of formal employment, as well as a fall in unemployment. The random assignment design also allows to implement a saturation approach to measure displacement effects, which, if anything, we found to be positive over not beneficiaries. We explore alternative mechanisms that could produce all these impacts of real world first job experience, and we find evidence favoring a reduction in informational barriers over alternative explanations, like on-the-job skills development.