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Journal of Evolutionary Economics

, Volume 13, Issue 1, pp 29–51 | Cite as

Endogenous fluctuations in the demand for education

  • Michael Neugart
  • Jan Tuinstra
Original paper

Abstract. Enrollment rates to higher education reveal a quite large variation over time which cannot be explained by productivity shocks alone. We develop a human capital investment model in an overlapping generations framework that features endogenous fluctuations in the demand for education. Agents are heterogeneous in their beliefs about future wage differentials. An evolutionary competition between the heterogeneous beliefs determines the fraction of the newborn generation having a certain belief. Costly access to information on the returns to education induces agents to use potentially destabilizing backward looking prediction rules. Only if previous generations experience regret about their human capital investment decisions, will agents choose a more sophisticated prediction rule that dampens the cycle. Access to information becomes key for stable flows to higher education.

Key words: Expectations – Human capital investment – Endogenous fluctuations – Inter-generational spill-overs – Evolutionary dynamics – Bifurcation analysis 
JEL Classification: C60, E32, J24 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Michael Neugart
    • 1
  • Jan Tuinstra
    • 2
  1. 1.Center for European Studies, Harvard University, 27 Kirkland Street, Cambridge, MA 02138, USA (e-mail: neugart@fas.harvard.edu) US
  2. 2.Department of Quantitative Economics and CeNDEF, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands (e-mail: j.tuinstra@uva.nl) NL

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