Panel Paper:
Postsecondary Supply and Unemployment Dynamics
*Names in bold indicate Presenter
Our analysis begins with a descriptive examination of how unemployment dynamics vary with the postsecondary environment, which has not been previously explored by researchers. At the CBSA level, we estimate how unemployment rates as well as the frequency, length and magnitude of recessions vary with higher education supply conditions. This descriptive analysis is critical for establishing broad correlational patterns, but it is not causal because postsecondary supply is not randomly assigned across space.
We then implement an empirical strategy to tease out the mechanisms underlying this relationship. We use shift-share local labor demand shocks (Bartik 1991) that interact the local industrial mix in a base year with national changes in demand in each industry as a labor demand instrument. Using this measure combined with IPEDS data on the types of degrees produced by each institution, we estimate how higher education supply conditions in the base year affect the number and types of degrees produced. Do certain supply conditions facilitate more skill upgrading, and are the skill increases in areas that maintain higher labor demand? Using CPS and ACS data, we then estimate how the interaction of local labor demand shocks and postsecondary supply influences the occupational and industrial composition of workers in an area. Because we can pinpoint the industries driving the labor demand reduction in the shift-share instrument, we can see whether certain higher education supply conditions facilitate a shift from low-demand to high-demand industries and occupations. Finally, we calculate the implications of these effects for unemployment dynamics, thereby linking the first descriptive part of the paper with our causal estimates.