Abstract
Using a nationally representative sample of graduates from the high school class of 2003-2004, I test the warehouse hypothesis, which contends that youth are more likely to leave school and enter the labor force when there are available job opportunities (and vice versa). Using two measures of job opportunities--local unemployment rates and the percentage of local workers employed in jobs that require a bachelor's degree--I find support for the warehouse hypothesis. In areas where unemployment is low, with ample jobs that do not require a bachelor's degree, youth have higher odds of entering the labor force. In areas where unemployment is high, with few jobs that require only a high school diploma, youth have higher odds of entering college. The effect of unemployment on enrollment is more pronounced for low-income youth than for high-income youth, with both low- and high-income youth turning to four-year schools rather than two-year schools when job opportunities are limited.