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The Role of Credit Constraints in the Cyclicality of College Enrolments

  • Gautam Hazarika
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    Using data from the National Longitudinal Survey of Youth (NLSY), this paper investigates the effect of plausible credit constraints on the cyclicality of teen college enrolments. It is found that teens from wealthier families are more likely to attend college in regional recessions. However, this countercyclical impetus to enrolments is significantly weaker in teens from less wealthy families. The phenomenon is attributed to credit constraints. Teens from families that possess fewer assets to offer lenders as collateral must finance college mainly with part-time earnings and parental subsidies, sums that may dwindle in recessions, making college less affordable. This paper also examines the influence of regional economic conditions on the type of college attended. In particular, it finds no evidence that teens from less wealthy families favor cheaper community colleges in recessions. Also examined are the effects of regional economic conditions at age 18 on college attainment many years hence. It is found that regional economic conditions at 18 have no significant effect on long-term college attainment. Thus, changes in teen enrolment propensities associated with variation in regional economic conditions are merely timing effects.

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    File URL: http://www.tandfonline.com/10.1080/09645290210126887
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    Article provided by Taylor & Francis Journals in its journal Education Economics.

    Volume (Year): 10 (2002)
    Issue (Month): 2 ()
    Pages: 133-143

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    Handle: RePEc:taf:edecon:v:10:y:2002:i:2:p:133-143
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    1. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
    2. Stephen V. Cameron & James J. Heckman, 1993. "Determinants of Young Male Schooling and Training Choices," NBER Working Papers 4327, National Bureau of Economic Research, Inc.
    3. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
    4. Jacoby, Hanan G, 1994. "Borrowing Constraints and Progress through School: Evidence from Peru," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 151-60, February.
    5. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
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