The effect of local labour market conditions on educational choices: a cross country comparison

Publication type

Research Paper

Series Number



ImPRovE Working Papers


Publication date

August 15, 2013


Schooling decisions have a complex nature. Building on the theoretical predictions of the human capital investment model and on previous evidence, we study the relationship between prevailing labour market conditions and schooling decisions in three European countries: Italy, Germany and the UK. The paper contributes to the existing literature by explicitly modelling the role of home ownership in affecting the response to incentives coming from the labour market. The analysis shows that labour market conditions significantly influence the choice of post compulsory secondary education in Italy and the UK, but responses to such incentives are heterogeneous with respect to housing tenure. In Germany, labour markets do not affect the choice of the secondary school track, while they have a significant impact on the transition to tertiary education. As the educational decisions of young people are responsive to changes in the expected gains from education, and bearing in mind the education related goals set by the EU 2020 agenda, policies aimed at raising levels of human capital within the EU should aim at making education a profitable investment.





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