Characterizing the schooling cycle

Barbara Sadaba, Sunčica Vujić and Sofia Maier

Economic Modelling, 2024, vol. 132, issue C

Abstract: This paper examines the cyclical dynamics of school participation decision, using data for 16-24-year-olds attending full-time post-compulsory education in the UK in the period from 1995Q1 to 2019Q4. We find evidence of a highly persistent education cycle, largely explained by the business cycle. Importantly, the response of school participation to the business cycle is time-dependent – counter-cyclical in the period around the Great Financial Crisis and pro-cyclical in other years. We propose two channels as predictors of the cyclicality of schooling – the ability-to-pay for further education and the opportunity-cost of spending time in education rather than at work. We also show that the results are heterogeneous by gender, with female choices being more responsive to changes in aggregate macroeconomic conditions than male choices. Timely policy interventions using regular education as a counter-cyclical tool can help prevent persistent or permanent unemployment in the aftermath of a crisis.

Keywords: Human capital; Business cycle; State space; Kalman smoother (search for similar items in EconPapers)
JEL-codes: C32 E3 I2 J2 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Characterizing the Schooling Cycle (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:132:y:2024:i:c:s0264999324000051

DOI: 10.1016/j.econmod.2024.106649

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