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Family Resources and Human Capital in the Great Recession
Journal article   Peer reviewed

Family Resources and Human Capital in the Great Recession

Garrett Anstreicher
Journal of labor economics
08/06/2025
DOI: 10.1086/737994

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Abstract

I study how the Great Recession impacted the human capital of young adults. Using a novel dataset from U.S. Census, I document that the negative effects of worse local economic shocks on educational attainment are concentrated among middle-class children. I then develop a model of selection into college and life-cycle earnings. Simulating a recession in the model produces a “hollowing out the middle” in lifecycle earnings. An expansion to financial aid that insures against parental wealth shocks can mitigate these effects while being approximately revenue-neutral, and the presence of a recession makes progressive financial aid policy more cost-effective in general.

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