The Effect of Cohort Size on Earnings Growth: A Reexamination of the Evidence

This study reexamines the effect of cohort size on earnings growth. Finis Welch finds that individuals in larger cohorts experience depressed earnings conditions on entry into the labor market but that their earnings grow at faster rates than in smaller cohorts. Thus, a large portion of the cohort size effect on earnings dissipates after a few years. However, using data almost identical to those of' Welch, but estimating less restrictive models, it is found here that cohort size not only depresses earnings at entry but also seems to slow down early career earnings growth. The evidence suggests that earnings inI larger cohorts do not approach "normal" levels after at brief' period in the labor force. Rather, the negative cohort size effect on earnings appears to worsen with experience.