Countercyclical college-going is a stylized fact in economics. But does this finding hold with a dual education system as an outside option? This study uses German register data to show that reduced local labor demand at high school graduation decreases college enrollment and attainment. More students choose vocationally oriented colleges and apprenticeships instead of traditional universities. Conditional on economic preferences, these effects are reversed for high SES graduates. Survey data further reveals that low-achieving young men expect higher relative returns to vocational education during recessions. The findings suggest that investment in firm-specific human capital is perceived as an insurance mechanism.

Using detailed data from a unique survey of high school graduates in Germany, we document a gender gap in expected full-time earnings of more than 15%. We decompose this early gender gap and find that especially differences in coefficients help explain different expectations. In particular, the effects of having time for family as career motive and being first-generation college student are associated with large penalties in female wage expectations exclusively. This is especially true for higher expected career paths. Resulting expected returns to education are associated with college enrollment of women and could thus entrench subsequent gaps in realized earnings.

Following a landmark court ruling in 2005, more than half of Germany’s universities started charging tuition fees, which were later abolished in a staggered manner. We exploit the fact that even students who were already enrolled had to start paying fees. We show that fees increase study effort and degree completion among these students. However, fees also decrease first-time university enrollment among high school graduates. Combining this enrollment impact with the effect on completion, we find that fees around the zero-price margin have only little effect on overall educational attainment. We conclude by discussing policies targeting the separate effect margins of fees and caution against a general abolition.