Later-borns Don't Give Up: The Temporary Effects of Birth Order on European Earnings

The existing empirical evidence on the effects of birth order on wages does not distinguish between temporary and permanent effects. Using data from 11 European countries for males born between 1935 and 1956, we show that firstborns enjoy on average a 13.7% premium in their entry wage compared with later-borns. This advantage, however, is short-lived and disappears 10 years after labor market entry. Although firstborns start with a better job, partially because of their higher education, later-borns quickly catch up by switching earlier and more frequently to better-paying jobs. We argue that a key factor driving our findings is that later-borns have lower risk aversion than firstborns.