The Effects of the Great Depression on Educational Attainment

This paper examines the relationship between the Great Depression and the educational attainment of young adults who were growing up during the 1930s, taking advantage of the statelevel variation in employment as individuals were turning a critical age. I find that there was negligible association between the Great Depression’s severity and the average years of education. Statistically significant difference is found only for white females who could expect a larger premium on schooling during the 1930s. Regional differences in availability of appropriate schools, however, may mask the varying effects in different regions. Splitting the sample into different regions, I find numerically larger and statistically significant results in more populous regions and states in which there were more public junior colleges. A small substitution effect found at the mean does not necessarily indicate that the impact of the Great Depression was uniform across the distribution of educational attainment. At the top end of educational attainment, the income effect seems to outweigh the substitution effect. The results of quantile regressions suggest that a ten-point decrease in the employment index is related to 27 percent of a year longer schooling of white males at the 90-percentile of the distribution. In sum, the Great Depression may have increased the average educational attainment, but the net effects seem small. More importantly, it appears to have compressed the distribution of educational attainment among white males. My results also suggest that for the substitution effect to work, supply factors such as availability of appropriate institutions may be important. JEL Classification Codes: I20, N32