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Housing Booms and Busts, Labor Market Opportunities, and College Attendance

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  • Kerwin Kofi Charles
  • Erik Hurst
  • Matthew J. Notowidigdo

Abstract

We study how the recent national housing boom and bust affected college enrollment and attainment during the 2000s. We exploit cross-city variation in local housing booms, and use a variety of data sources and empirical methods, including models that use plausibly exogenous variation in housing demand identified by sharp structural breaks in local housing prices. We show that the housing boom improved labor market opportunities for young men and women, thereby raising their opportunity cost of college-going. According to standard human capital theories, this effect should have reduced college-going overall, but especially for persons at the margin of attendance. We find that the boom substantially lowered college enrollment and attainment for both young men and women, with the effects concentrated at two-year colleges. We find that the positive employment and wage effects of the boom were generally undone during the bust. However, attainment for the particular cohorts of college-going age during the housing boom remain persistently low after the end of the bust, suggesting that reduced educational attainment may be an enduring effect of the housing cycle. We estimate that the housing boom explains roughly 30 percent of the recent slowdown in college attainment.

Suggested Citation

  • Kerwin Kofi Charles & Erik Hurst & Matthew J. Notowidigdo, 2015. "Housing Booms and Busts, Labor Market Opportunities, and College Attendance," NBER Working Papers 21587, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21587
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    References listed on IDEAS

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    Cited by:

    1. Bradley Heim & Ithai Lurie & Kosali Simon, 2017. "Did the Affordable Care Act Young Adult Provision Affect Labor Market Outcomes? Analysis Using Tax Data," NBER Working Papers 23471, National Bureau of Economic Research, Inc.
    2. Manisha Shah & Bryce Millett Steinberg, 2015. "Workfare and Human Capital Investment: Evidence from India," NBER Working Papers 21543, National Bureau of Economic Research, Inc.
    3. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2017. "Housing booms and busts and local fiscal policy," ZEW Discussion Papers 17-001, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Michael Bailey & Ruiqing Cao & Theresa Kuchler & Johannes Stroebel, 2016. "Social Networks and Housing Markets," NBER Working Papers 22258, National Bureau of Economic Research, Inc.
    5. Brad Hershbein & Lisa B. Kahn, 2016. "Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings," NBER Working Papers 22762, National Bureau of Economic Research, Inc.
    6. Atif Mian & Amir Sufi & Emil Verner, 2017. "Household Debt and Business Cycles Worldwide," The Quarterly Journal of Economics, Oxford University Press, vol. 132(4), pages 1755-1817.
    7. Shai Bernstein & Timothy McQuade & Richard R. Townsend, 2017. "Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers During the Great Recession," NBER Working Papers 24011, National Bureau of Economic Research, Inc.
    8. Virgiliu Midrigan & Elena Pastorino & Patrick Kehoe, 2014. "Debt Constraints and Unemployment," 2014 Meeting Papers 1118, Society for Economic Dynamics.
    9. Kehoe, Patrick J. & Midrigan, Virgiliu & Pastorino, Elena, 2018. "Evolution of Modern Business Cycle Models: Accounting for the Great Recession," Staff Report 566, Federal Reserve Bank of Minneapolis.
    10. Francesco Agostinelli & Giuseppe Sorrenti, 2018. "Money vs. Time: Family Income, Maternal Labor Supply, and Child Development," Working Papers 2018-017, Human Capital and Economic Opportunity Working Group.
    11. Atif R. Mian & Amir Sufi, 2018. "Finance and Business Cycles: The Credit-Driven Household Demand Channel," NBER Working Papers 24322, National Bureau of Economic Research, Inc.
    12. John Mondragon & Janice Eberly & Gene Amromin, 2017. "The Housing Crisis and the Rise in Student Loans," 2017 Meeting Papers 369, Society for Economic Dynamics.

    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
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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