Recessions curb student aspirations for higher education
Banca d'Italia researchers find that economic downturns significantly reduce students' aspirations for tertiary education. Greater exposure to adverse business cycle conditions also negatively affects high school GPA, college enrollment, and dropout rates.
Shadow of unemployment on student goals
The study investigates how economic downturns, such as the Great Recession, influence human capital accumulation by impacting adolescents' educational aspirations and subsequent academic choices.
Using Italian student census data matched with administrative records, researchers constructed an individual-level measure of exposure to local labor market conditions, based on the share of school peers whose parents are unemployed.
Identification relies on quasi-random variation in exposure across adjacent cohorts within the same school.
Findings indicate that a 1 percentage point increase in exposure to peers with unemployed parents reduces the probability of aspiring to tertiary education by 0.05 percentage points.
This effect is economically significant, implying approximately 2,000 fewer students annually pursuing a university degree in cohorts with high exposure.
The negative impact extends to subsequent outcomes, including high school GPA, university enrollment, and dropout rates.
Interestingly, the study reveals a non-monotonic relationship: students from relatively better-off families, who are more likely to be at the margin of investing in tertiary education, revise their aspirations and investments the most.
Beyond immediate college choices
This research contributes to understanding how macroeconomic conditions affect human capital accumulation beyond immediate college enrollment decisions.
Economic downturns can alter students' life goals and educational aspirations, leading to lower long-term human capital investments and income.
The unique dataset merges census data from the Italian Education Authority (Invalsi) with administrative records from national student registries, covering eight consecutive cohorts of 10th-grade students.
The work contributes to three main areas: the effects of cyclical macroeconomic conditions on human capital accumulation, the influence of individual aspirations on economic decision-making, and the impact of school peers' parents' characteristics on educational choices.
It challenges the conventional view that education is simply counter-cyclical by revealing a deeper, aspiration-driven mechanism.
Aspirations: The hidden cost of recession
This study uncovers a critical, often overlooked, long-term cost of economic downturns: the erosion of educational aspirations among adolescents.
It highlights how indirect exposure to unemployment can subtly reshape future human capital investments, potentially perpetuating cycles of disadvantage.
The findings suggest that policy responses to recessions should consider not only immediate labor market impacts but also the profound, lasting psychological effects on younger generations' educational ambitions.