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A Lost Generation? Education Decisions and Employment Outcomes during the US Housing Boom-Bust Cycle of the 2000s

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  • Luc Laeven
  • Alexander Popov

Abstract

We exploit regional variations in U.S. house price fluctuations during the boom-bust cycle of the 2000s to study the impact of the housing cycle on young Americans' choices related to education and employment. We find that in MSAs which experienced large increases in house prices between 2001 and 2006, young adults were substantially more likely to forego a higher education and join the workforce, lowering skill formation. During the bust years, the young, especially those without higher education, were more likely to be unemployed in areas which experienced higher declines in house prices.

Suggested Citation

  • Luc Laeven & Alexander Popov, 2016. "A Lost Generation? Education Decisions and Employment Outcomes during the US Housing Boom-Bust Cycle of the 2000s," American Economic Review, American Economic Association, vol. 106(5), pages 630-635, May.
  • Handle: RePEc:aea:aecrev:v:106:y:2016:i:5:p:630-35
    Note: DOI: 10.1257/aer.p20161085
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    References listed on IDEAS

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    1. Dettling, Lisa J. & Kearney, Melissa S., 2014. "House prices and birth rates: The impact of the real estate market on the decision to have a baby," Journal of Public Economics, Elsevier, vol. 110(C), pages 82-100.
    2. repec:wly:jmoncb:v:49:y:2017:i:5:p:861-895 is not listed on IDEAS
    3. Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
    4. Stefano Corradin & Alexander Popov, 2015. "House Prices, Home Equity Borrowing, and Entrepreneurship," Review of Financial Studies, Society for Financial Studies, vol. 28(8), pages 2399-2428.
    5. Midrigan, Virgiliu & Philippon, Thomas, 2011. "Household Leverage and the Recession," CEPR Discussion Papers 8381, C.E.P.R. Discussion Papers.
    6. Michael F. Lovenheim & Kevin J. Mumford, 2013. "Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 464-475, May.
    7. Luc Laeven & Alexander Popov, 2017. "Waking Up from the American Dream: On the Experience of Young Americans during the Housing Boom of the 2000s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(5), pages 861-895, August.
    8. Kerwin Kofi Charles & Erik Hurst & Matthew J. Notowidigdo, 2013. "Housing Booms, Manufacturing Decline, and Labor Market Outcomes," NBER Working Papers 18949, National Bureau of Economic Research, Inc.
    9. Giovanni Dell’Ariccia & Deniz Igan & Luc Laeven, 2012. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 367-384, March.
    10. Martin Farnham & Lucie Schmidt & Purvi Sevak, 2011. "House Prices and Marital Stability," American Economic Review, American Economic Association, vol. 101(3), pages 615-619, May.
    11. Loutskina, Elena & Strahan, Philip E., 2015. "Financial integration, housing, and economic volatility," Journal of Financial Economics, Elsevier, vol. 115(1), pages 25-41.
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    Citations

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    Cited by:

    1. Saadi, Vahid, 2016. "Mortgage supply and the US housing boom: The role of the community reinvestment act," IWH Discussion Papers 32/2016, Halle Institute for Economic Research (IWH).
    2. Gunes, Pinar & Ural Marchand, Beyza, 2018. "Macroeconomic Conditions and Child Schooling in Turkey," Working Papers 2018-10, University of Alberta, Department of Economics.
    3. Popov, Alexander & Zaharia, Sonia, 2017. "Credit market competition and the gender gap: evidence from local labor markets," Working Paper Series 2086, European Central Bank.
    4. Saadi, Vahid, 2016. "Mortgage supply and the US housing boom: The role of the Community Reinvestment Act," SAFE Working Paper Series 155, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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