Leveling the peaks and troughs in the demographic cycle: An application to school enrollment rates,” The Review of Economics and Statistics

Abslrau- To max.i mize lifetime discounted earnings, ind ividu-als ac t so as to t1ll in the peaks and troughs of the demograph.ic cycles exhibited by popula tion and hence relative income. As a consequence. those born prior to the peak mcrease thCJr school enrollment rates. while th ose tra.J.!ing the peak decrease their school enrollment rates. Education thus provides a differential track.ino mechan.i sm. While individuals cannot choose the cohorts 0 in which they are born, they are able to time their entry into the career labor market through education. Th.is asymmet-ric demoo raph.ic effec t is tested in a time series equation. Our model h~lps to expla.in the " surprisi ngly " steep decline In school enrollment rates during the 1970s. I