Forever young: schooling incentives

Changes in labour market opportunities, income levels, government spending on education or in the expected returns to schooling –among others macroeconomic turbulences– may strongly affect the demand for education of the young generations. The current study evaluates the schooling responses to changes in these aggregate economic conditions using a panel data set with 33 European countries over the period 1980-2010. For high-income countries the theoretical models developed during the last decades as well as the empirical literature suggest a counter-cyclical pattern of the demand for education. The depth and length of the current crisis and the high disparities in the performance of the European economies necessitate a new evaluation though. The main results of the empirical estimations suggest that the pattern found for high-income countries like the US and the UK may not hold for the whole of Europe; since there is consistent evidence suggesting a pro-cyclical behaviour of the demand for education in European countries with relatively low income levels.