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Endogenous fluctuations in the demand for education

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  • Neugart, Michael
  • Tuinstra, Jan

Abstract

Enrolment rates to higher education reveal quite large variation over time which cannot be explained by productivity shocks alone. We develop a human capital investment model in an overlapping generations framework that features endogenous fluctuations in the demand for education. Agents are heterogeneous in their beliefs about future wage differentials. An evolutionary competition between the heterogeneous beliefs determines the fraction of the newborn generation having a certain belief. Costly access to information on the returns to education induces agents to use potentially destabilizing backward looking prediction rules. Only if previous generations experience regret about their human capital investment decisions, agents will choose a more sophisticated prediction rule that dampens the cycle. Access to information becomes key for stable flows to higher education. - expectations ; human capital investment ; endogenous fluctuations ; intergenerational spill-overs evolutionary dynamics ; bifurcation analysis

Suggested Citation

  • Neugart, Michael & Tuinstra, Jan, 2001. "Endogenous fluctuations in the demand for education," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 01-209, WZB Berlin Social Science Center.
    • Handle: RePEc:zbw:wzblpe:fsi01209
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    Cited by:

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    2. Mignot, Sarah & Pellizzari, Paolo & Westerhoff, Frank H., 2024. "Fake news and asset price dynamics," BERG Working Paper Series 192, Bamberg University, Bamberg Economic Research Group.
    3. Lines Marji & Westerhoff Frank, 2012. "Effects of Inflation Expectations on Macroeconomic Dynamics: Extrapolative Versus Regressive Expectations," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(4), pages 1-30, October.
    4. Konrad, Kai A. & Kovenock, Dan, 2012. "The lifeboat problem," European Economic Review, Elsevier, vol. 56(3), pages 552-559.
    5. Schmitt, Noemi & Tuinstra, Jan & Westerhoff, Frank, 2017. "Side effects of nonlinear profit taxes in an evolutionary market entry model: Abrupt changes, coexisting attractors and hysteresis problems," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 15-38.
    6. Čepar Žiga & Bojnec Štefan, 2010. "Higher Education Demand Factors and the Demand for Tourism Education in Slovenia," Organizacija, Sciendo, vol. 43(6), pages 257-266, November.
    7. Pietro Dindo & Jan Tuinstra, 2011. "A Class of Evolutionary Models for Participation Games with Negative Feedback," Computational Economics, Springer;Society for Computational Economics, vol. 37(3), pages 267-300, March.
    8. Michael Wegener & Frank Westerhoff, 2012. "Evolutionary competition between prediction rules and the emergence of business cycles within Metzler’s inventory model," Journal of Evolutionary Economics, Springer, vol. 22(2), pages 251-273, April.
    9. Sorin Lugojan & Loredana Ciurdariu & Eugenia Grecu, 2022. "Chenciner Bifurcation Presenting a Further Degree of Degeneration," Mathematics, MDPI, vol. 10(9), pages 1-17, May.
    10. He, Xue-Zhong & Li, Kai & Wang, Chuncheng, 2016. "Volatility clustering: A nonlinear theoretical approach," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 274-297.
    11. Dong, Cao & Yaozhong, Wang, 2009. "Controlling endogenous fluctuations of human capital investment in an OLG economy," Economic Modelling, Elsevier, vol. 26(6), pages 1335-1340, November.

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    More about this item

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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