Student Research

How the Business Cycle Affects Undergraduate Decisions About Graduate School

By Michael Lorch

The Economics Senior Essay Seminar sequence (Economics 191A–191B) has been the most intellectually stimulating experience in my academic career. As a joint major in economics and mathematics with a minor in business, I found the series perfect for me because it allowed me to receive departmental honors; gave me a chance to see if I enjoyed research; and provided me the opportunity to use the economics, math and writing skills I mastered throughout my time at UC San Diego. The extensive process has challenged my ability to solve economic problems and has helped me get a realistic idea of what writing an academic paper entails. Much of my success in completing and excelling in my first economic research paper must be attributed to my professor and academic adviser throughout the entire process, Roger Gordon, and my fellow Economics 191A–B classmates.

The Process

After formulating the initial research question, Professor Gordon helped guide me through the rest of the paper. As is common with most empirical economic studies, my paper includes an introduction of the research topic, an in-depth literature review of past papers, a theoretical background section, a comprehensive empirical analysis, an examination of the results, and conclusions that come out of the study. All this seems daunting without the help of an experienced faculty member who gives straightforward answers to these complex research questions. In addition to having periodic meetings with Professor Gordon, at different stages in the writing process I presented my findings to classmates. Comprising some of the top students in the Department of Economics, my classmates provided another prospective and ultimately gave me many great suggestions and comments that substantially improved my paper.

Research Results

My research meticulously observes, measures and analyzes the impact that fluctuations in the domestic economy have on two important decisions many undergraduates must make: whether to apply to graduate school and, once admitted, whether to enroll in a specific graduate school. Using a time-series data set from the UC San Diego Office of Graduate Studies from 1994 through 2004 and the United States annual unemployment rates to measure fluctuations in the business cycle, I found that an undergraduate’s application and enrollment decisions are countercyclical, with a few departmental exceptions. By using department type, a time control, tuition, financial aid and initial job placement after graduation as control variables, my study sets up a number of unique regressions in order to fully explain how the business cycle affects these decisions. I found a statistically significant countercyclical effect on both domestic and foreign students in the application decision. The study also observes a statistically significant increase in the percentage of enrolled graduate students when the annual unemployment rates increase.

In addition to basic application and enrollment decisions, this study thoroughly analyzes how annual unemployment rates affect the percentage of female and minority applications, the quality of students applying and enrolling to UC San Diego graduate programs, and the number of admissions and newly enrolled students. Scripps Institution of Oceanography is the only department that consistently has a procyclical affect: As the annual unemployment rate increases, there is a statistically significant probability that application and enrollment levels will decrease at Scripps.

Reflections

There is a huge sense of accomplishment in completing an economic paper of this magnitude as an undergraduate. As another a reward for all my hard work, I have been nominated to present my findings at the 2012 UC San Diego Undergraduate Research Conference in April. I fully encourage any motivated and hardworking student that is part of the Department of Economics to accept the challenge and opportunity of writing a senior thesis paper. I have no regrets and hope the students who enroll in the Economics 191 series next year find it as challenging and fulfilling as I did.