On the relationship between the business cycle and college enrollment in the U.S.: a time series approach

Causality between business cycle and college enrollment in the United States was examined using macro-level data from 1970 to 2011. Autoregressive distributed lag (ARDL) bounds test and Johansen test for cointegration showed a stable long-run cointegrating relationship among unemployment rate, per capita GDP, and college enrollment. Study results showed that the unemployment rate Granger caused college enrollment in both the short and the long run while GDP per capita Granger caused college enrollment only in the long run. Results indicated that, in the short run, college enrollment responds only to the change in opportunity costs over the business cycle. However, education is a normal good in the long run, and hence, college enrollment rises with increased incomes.