Local Labor Markets, Risk, and the Firm-Specificity of Human Capital

Abstract

This study exploits within-region across-time variation in labor demand to identify the effect of economic downturns on the skill content of human capital investments. Administrative data on students in German higher education shows that local labor market shocks at high school graduation decrease first-time enrollment at classic universities but increase enrollment at more applied institutions, majors, and de- grees. Survey data reveals stronger effects for risk-averse individuals and reversed effects for high-SES graduates. I argue that firm-specific rather than general skill investment is perceived as an insurance mechanism against economic uncertainties.

Andreas Leibing

PhD Candidate

My research interests include labor economics and the economics of education, especially the tertiary sector.