When Does Education Matter? The Protective Effect of Education for Cohorts Graduating in Bad Times

David Cutler, Wei Huang & Adriana Lleras-Muney
Working Paper 20156
DOI 10.3386/w20156
Issue Date

Using Eurobarometer data, we document large variation across European countries in education gradients in income, self-reported health, life satisfaction, obesity, smoking and drinking. While this variation has been documented previously, the reasons why the effect of education on income, health and health behaviors varies is not well understood. We build on previous literature documenting that cohorts graduating in bad times have lower wages and poorer health for many years after graduation, compared to those graduating in good times. We investigate whether more educated individuals suffer smaller income and health losses as a result of poor labor market conditions upon labor market entry. We confirm that a higher unemployment rate at graduation is associated with lower income, lower life satisfaction, greater obesity, more smoking and drinking later in life. Further, education plays a protective role for these outcomes, especially when unemployment rates are high: the losses associated with poor labor market outcomes are substantially lower for more educated individuals. Variation in unemployment rates upon graduation can potentially explain a large fraction of the variance in gradients across different countries.

Published Versions

Cutler, David M. & Huang, Wei & Lleras-Muney, Adriana, 2015. "When does education matter? The protective effect of education for cohorts graduating in bad times," Social Science & Medicine, Elsevier, vol. 127(C), pages 63-73. citation courtesy of

Related

Topics

Health, Education, and Welfare
Health
Education
Labor Economics
Demography and Aging

Programs

Economics of Education
Economics of Health
Labor Studies

More from NBER

In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.

2024, 16th Annual Feldstein Lecture, Cecilia E. Rouse," Lessons for Economists from the Pandemic" cover slide
2024, 16th Annual Feldstein Lecture, Cecilia E. Rouse," Lessons for Economists from the Pandemic"
  • Feldstein Lecture
Cecilia Rouse, president of the Brookings Institution and a professor at Princeton University, who chaired the Council...
2024 Methods Lecture, Susan Athey, "Analysis and Design of Multi-Armed Bandit Experiments and Policy Learning"
2024 Methods Lecture, Susan Athey, "Analysis and Design of Multi-Armed Bandit Experiments and Policy Learning"
  • Methods Lectures
Background Materials:backgroundAthey, Susan, Undral Byambadalai, Vitor Hadad, Sanath Kumar Krishnamurthy, Weiwen Leung...
2024, Economics of Social Security Panel, "Earnings Inequality and Payroll Tax Revenues"
2024, Economics of Social Security Panel, "Earnings Inequality and Payroll Tax Revenues"
  • Panel Discussion