Expecting less in hard times: How the state of the economy influences students’ educational expectations

Abstract

Students’ realistic aspirations about their educational attainment (expectations) are predictive of their efforts, actions, and future outcomes. Limited evidence suggests these expectations are affected by the macroeconomy; however, the direction is ambiguous. We combine seven waves of Programme for International Student Assessment (PISA) data to examine this relationship in 38 OECD countries. Using within-country fixed-effect regressions, we find students have significantly lower educational expectations when GDP growth is low or negative. Assessing the heterogeneity of these relationships, we find that the expectations of students with below-average reading skills or who attend non-metropolitan schools are most strongly affected by the state of the economy. The results also suggest that when GDP growth is weak, students are significantly more likely to complete zero homework and arrive late to school, are less likely to participate in extracurricular academic programs, and expect lower labour market returns to completed education.