The Effect of Business Cycles on Educational Attainment
University of Colorado at Denver
University of Oregon - Department of Economics
University of Colorado at Denver - Department of Economics
May 13, 2013
This paper studies the impact of fluctuations in unemployment rates before high school graduation, at age 17, on educational attainment. We hypothesize that schooling decisions are counter-cyclical, but that the impact of higher unemployment rates varies over the ability distribution, as measured by the Armed Forces Qualifying Test (AFQT). Using data from the 1979 National Longitudinal Study of Youth (NLSY79), combined with information on national unemployment rates, we find support for this hypothesis. Specifically, we find that higher unemployment rates at age 17 increase completed years of education and the probability of college graduation for individuals in the 60th-80th quintile of the AFQT distribution. We find no evidence that higher unemployment rates are related to the probability of high school graduation.
Number of Pages in PDF File: 19
Keywords: human capital accumulation, unemployment, business cycles, ability
JEL Classification: I2, J6, E2
Date posted: July 16, 2013
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