Housing Booms and Busts, Labor Market Opportunities, and College Attendance

66 Pages Posted: 28 Sep 2015 Last revised: 30 Oct 2015

See all articles by Kerwin Kofi Charles

Kerwin Kofi Charles

University of Chicago - Harris School of Public Policy

Erik Hurst

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Matthew Notowidigdo

University of Chicago - Booth School of Business

Date Written: September 2015

Abstract

We study how the recent national housing boom and bust affected college enrollment and attainment during the 2000s. We exploit cross-city variation in local housing booms, and use a variety of data sources and empirical methods, including models that use plausibly exogenous variation in housing demand identified by sharp structural breaks in local housing prices. We show that the housing boom improved labor market opportunities for young men and women, thereby raising their opportunity cost of college-going. According to standard human capital theories, this effect should have reduced college-going overall, but especially for persons at the margin of attendance. We find that the boom substantially lowered college enrollment and attainment for both young men and women, with the effects concentrated at two-year colleges. We find that the positive employment and wage effects of the boom were generally undone during the bust. However, attainment for the particular cohorts of college-going age during the housing boom remain persistently low after the end of the bust, suggesting that reduced educational attainment may be an enduring effect of the housing cycle. We estimate that the housing boom explains roughly 30 percent of the recent slowdown in college attainment.

Suggested Citation

Charles, Kerwin Kofi and Hurst, Erik and Notowidigdo, Matthew, Housing Booms and Busts, Labor Market Opportunities, and College Attendance (September 2015). NBER Working Paper No. w21587, Available at SSRN: https://ssrn.com/abstract=2666355

Kerwin Kofi Charles (Contact Author)

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States
(773) 834-8922 (Phone)

Erik Hurst

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Matthew Notowidigdo

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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