No. 1528 - A great depression? Students' educational aspirations and investments in the aftermath of the Great Recession
This paper examines the effects of the business cycle on students' aspirations and their subsequent educational investments. We use census data on eight cohorts of high school students from 2011 to 2018, linked to their later university careers. The estimation strategy relies on students' exposure to schoolmates with unemployed parents, used as an indicator of the local perception of the economic cycle.
Economic crises tend to have persistent effects on human capital accumulation, also through a mechanism of revised educational aspirations. Greater exposure to schoolmates with unemployed parents reduces students' aspirations to pursue university studies, worsens their educational outcomes in subsequent years, and, among those who do enroll at college, increases the risk of dropping out.
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