When Does Education Matter? The Protective Effect of Education for Cohorts Graduating in Bad Times

47 Pages Posted: 26 May 2014

See all articles by David M. Cutler

David M. Cutler

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Wei Huang

Harvard University - Department of Economics; NBER; IZA Institute of Labor Economics

Adriana Lleras-Muney

Princeton University - Woodrow Wilson School of Public and International Affairs; National Bureau of Economic Research (NBER)

Date Written: May 2014

Abstract

Using Eurobarometer data, we document large variation across European countries in education gradients in income, self-reported health, life satisfaction, obesity, smoking and drinking. While this variation has been documented previously, the reasons why the effect of education on income, health and health behaviors varies is not well understood. We build on previous literature documenting that cohorts graduating in bad times have lower wages and poorer health for many years after graduation, compared to those graduating in good times. We investigate whether more educated individuals suffer smaller income and health losses as a result of poor labor market conditions upon labor market entry. We confirm that a higher unemployment rate at graduation is associated with lower income, lower life satisfaction, greater obesity, more smoking and drinking later in life. Further, education plays a protective role for these outcomes, especially when unemployment rates are high: the losses associated with poor labor market outcomes are substantially lower for more educated individuals. Variation in unemployment rates upon graduation can potentially explain a large fraction of the variance in gradients across different countries.

Suggested Citation

Cutler, David M. and Huang, Wei and Lleras-Muney, Adriana, When Does Education Matter? The Protective Effect of Education for Cohorts Graduating in Bad Times (May 2014). NBER Working Paper No. w20156. Available at SSRN: https://ssrn.com/abstract=2441807

David M. Cutler (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center, Room 315A
Cambridge, MA 02138
United States
617-496-5216 (Phone)
617-495-8570 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3900 (Phone)
617-868-2742 (Fax)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Wei Huang

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Adriana Lleras-Muney

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
7
Abstract Views
308
PlumX Metrics