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Since 1976. the application rate of high school students for university has remained level at around fifty percent, and this seems to have contributed to the excess supply of higher education caused by the demographic decline, However. previous research has not clarified the reason why students do not go on to university despite the ease if access. This paper examines the extent to which economic factors underlie the stabilization of the application rate at 5090. through an analysis of the determinants of entrance rates for senmon gakkô (technical schools) and employment rates after high school graduation from 1970 to 2004, The results of the analysis of the obvious demand factors indicate that household income has a strong positive impact, the price of private university tuition has a negative impact, and the unemployment rate has a positive impact on the application rate. Statistically, these results are weak, as they have a low value on the D. W. criteria, so the author uses the chow test approach to this problem solving. The test shows that there are structural changes in the trend of the determinants factor of the application rate during three decades, meaning that it would be better to divide it into three period times, 1970 1975. 1976 1996 and 1997 2004. In the first period, household income increases demand without an influence from price, and in the second period there was a positive effect of income, negative effect of price, and positive effect of the unemployment rate. In the third period, only unemployment had an impact, and there was no effect of income and price. It is possible to understand the leveling off of demand for higher education by considering household budget conditions, the rapid price increases since 1975, and in particular the high unemployment rate since 1997. However, the demand for higher education is actually higher than the application rate, since there are students who find employment or go to technical schools as a substitute for going to university. In order to consider this latent demand for higher education. an analysis of the determinants of the employment rate and entrance rate for technical schools is introduced. This analysis shows that there are individuals who find employment instead of going to university for the reason of the high price, and who go to technical .schools for the reason of the high prices and low acceptance rate for entrance examinations. This result indicates that, considering this latent demand, the demand for higher education is larger than that indicated by the application rate. One policy implication of this study is that the application rate will increase in the near future as the economic recovery makes the latent demand obvious. Second, since there is still inequality of educational opportunities, low tuition and student aid should he introduced to equalize enrollment difference based on family income. [ABSTRACT FROM AUTHOR]