The Long-Run Effects of Recessions on Education and Income

August 2017

Bryan Stuart

IIEP Working Paper 2017-25

Abstract: This paper examines the long-run effects of the 1980-1982 recession on education and income. Using confidential Census data, I estimate difference-in-differences regressions that exploit variation across counties in recession severity and across cohorts in age at the time of the recession. For individuals age 0-10 in 1979, a 10 percent decrease in earnings per capita in their county of birth reduces four-year college degree attainment by 9 percent and income in adulthood by 3 percent. Simple calculations suggest that, in aggregate, the 1980-1982 recession led to 1-3 million fewer college graduates and $64-$145 billion less earned income per year.

JEL Classification Codes: E32, I20, I30, J13, J24

Keywords: human capital, education, income, recessions

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