Labor market conditions and college graduation: evidence from Brazil

Abstract: College students graduating in a recession have been shown to face large and persistent negative effects on their earnings, health, and other outcomes. This paper investigates whether students delay graduation to avoid these effects. Using data on the universe of students in higher education in Brazil and leveraging variation in labor market conditions across time, space, and chosen majors, the paper finds that students in public institutions delay graduation to avoid entering depressed labor markets. A typical recession causes the on-time graduation rate to fall by 6.5% in public universities and there is no effect on private institutions. The induced delaying increases average graduation by 0.11 semesters, consistent with 1 out of 18 students delaying graduation by one year in public universities. The delaying effect is larger for students with higher scores, in higher-earnings majors, and from more advantaged backgrounds. This has important implications for the distributional impact of recessions.