Service Jobs and Education: Evidence from Tourism Shocks in Italy

We explore how unexpected temporary increases in the demand for low-skill service jobs in the tourism industry impact educational choices in Italy. We identify exogenous variation in the demand for service jobs using positive shocks to the tourism industry caused by terrorist attacks in foreign destinations that compete with Italy for tourists. We find that an exogenous increase in tourism decreases college enrollment and completion in the year after the shock. The decline in enrollment is driven by fewer students choosing fields related to humanities and social sciences. Both men and women respond by reducing college enrollment and completion. The effect for men is temporary, while it is more persistent for women. These effects are likely driven by higher opportunity costs of college education, as we find that tourism shocks increase the demand for labor in service jobs, raising local employment in the tourism industry as well as labor force participation. Using an IV approach, we show that the average annual increase in tourist arrivals between 2010 and 2019 (21,000 tourists) increases tourism employment growth by 16 percent, while reducing college enrollment and completion growth by 9 percent.