Factors affecting the schooling performance of secondary school pupils - the cost of high unemployment and imperfect financial markets

Abstract

This paper investigates the implications of major ¯nancial markets crises for the human capital accumulation decisions of households. We use data for Argentinean households over the period 1995-2002 to examine households' response to negative idiosyncratic income shocks in di®erent macroeconomic scenarios. In particular we study how teenagers' school progress responds to household head unemployment during periods of high economic growth and compare it to the response during recession years, when families are more likely to be ¯nancially constrained. After accounting for the potential endogeneity of household head unemployment we ¯nd that school failure in response to unemployment shocks increases during periods of economic instability and that, at least for boys, this results from a greater involvement in labor market activities. Our results add to the existing literature on the long term cost of macroeconomic crises.imperfect credit markets, human capital, parental unemployment