Local Labor Demand and Achievement Gaps: Evidence from the Great Recession

We examine how contractions in local labor demand during the Great Recession affected children's academic achievement. We combine county-level test scores for grades 3–8 from the Stanford Education Data Archive with a shift-share design that interacts counties' 2005 industry composition with national industry employment growth, isolating demand-driven changes in local employment. Following recent advances in the shift-share literature, we validate the design with balance, pre-trend, and Rotemberg-weight diagnostics and report exposure-robust standard errors throughout. A one-standard-deviation adverse shock lowers mathematics achievement by about 0.03 student-level standard deviations and widens the White–Black and economic-disadvantage achievement gaps in both subjects. Within a common geography, losses concentrate among economically disadvantaged students. English language arts estimates point in the same direction but are harder to separate from the Great Recession's housing bust, and we interpret them as the combined effect of the labor-demand contraction and the associated decline in house prices. The achievement response is concentrated in the recession window. The post-2014 period, identified mainly by the oil-price cycle, yields a precise null, so our estimates measure the response to severe contractions rather than a general business-cycle parameter. School funding did not respond contemporaneously to these shocks, while family income, child poverty, and house prices all did.