The Long-Run Effects of Recessions on Education and Income

This paper examines the long-run effects of the 1980-1982 recession on education and income. Using confidential census data, I estimate difference-in-difference 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 15 percent and earnings in adulthood by 5 percent. Simple calculations suggest that in aggregate, the 1980-1982 recession led to 1.3-2.8 million fewer college graduates and $66-$139 billion less earned income per year.