HOW EDUCATION CONTRIBUTED TO U.S. HOUSEHOLD WEALTH CHANGES DURING THE 2008 ECONOMIC SHOCK?

Abstract

The Great Recession in 2008 cost American households trillions of dollars, and years after the shock, some families are still feeling the crush. However, the amount of losses or gains during the crisis vary across the population. This paper examines the role of education in these dynamic changes, asking whether more education helped people weather economic crisis better. Using data from the Federal Reserve’s Survey of Consumer Finances in year 2007 and year 2009, this paper examines the relationship between education and changes in family wealth, measured by total household assets. I use OLS regressions and Inverse Hyperbolic Sine (IHS) technique to examine these changes, and then determine whether the general pattern holds in each income quantile, and how the pattern changes as income increases, controlling for household demographic characteristics, and attitudes towards borrowing and saving, and other factors. My results indicate that during the shock, higher educational attainment was associated with larger changes in total assets, and wealthy households with more education experienced gains rather than loss.