Marco Tonello (Bank of Italy)
Eleonora Porreca and Lucia Rizzica
We study the impact of economic downturns on human capital accumulation, focusing on the effects of peer exposure to higher unemployment. We investigate whether students' educational aspirations, as well as their subsequent educational decisions and e ort, are influenced by the unemployment status of their peers' parents. Using data for 10th-grade students in Italy, we combine individual-level aspirations about the intentions to complete high school and to enrol at university with administrative register data on high school completion and university enrolment. Our identification strategy relies on comparing adjacent cohorts of students within the same school, exploiting the quasi-random variation in the share of peers with at least one unemployed parent. We find that higher exposure to peers with unemployed parents remarkably depresses students' aspirations to complete both secondary and tertiary education. Importantly, it also leads to lower high school diploma grades and a reduced likelihood of university enrolment.