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Skill Substitution, Expectations, and the Business Cycle

Author

Listed:
  • Leibing, Andreas

    (German Centre for Research on Higher Education and Science Studies (DZHW))

Abstract

Using administrative data on more than six million German high school graduates from 1995 to 2018, this paper studies how labor market conditions around high school graduation affect postsecondary skill investments. Exploiting cyclical deviations from secular state-specific trends, I find procyclical overall university enrollment, especially at academic universities. Long-run attainment effects are procyclical for academic universities and countercyclical for applied universities. Using large-scale survey data, I present changes in expected returns to different degrees as a potential mechanism. During downturns, graduates expect lower returns to university degrees, while expected returns to the outside option, apprenticeships, are stable.

Suggested Citation

  • Leibing, Andreas, 2026. "Skill Substitution, Expectations, and the Business Cycle," IZA Discussion Papers 18835, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18835
    as

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    More about this item

    Keywords

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    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • 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
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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