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Characterizing the schooling cycle

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  • Sadaba, Barbara
  • Vujić, Sunčica
  • Maier, Sofia

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.

Suggested Citation

  • Sadaba, Barbara & Vujić, Sunčica & Maier, Sofia, 2024. "Characterizing the schooling cycle," Economic Modelling, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:ecmode:v:132:y:2024:i:c:s0264999324000051
    DOI: 10.1016/j.econmod.2024.106649
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    More about this item

    Keywords

    Human capital; Business cycle; State space; Kalman smoother;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • I2 - Health, Education, and Welfare - - Education
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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