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Do Dropouts Drop Out Too Soon? Evidence from Changes in School-Leaving Laws

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Author Info
Philip Oreopoulos

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Abstract

his paper investigates if decisions to drop out of high school are sub-optimal, and whether students benefit from policies, such as a minimum school leaving age, that oblige them to finish school beyond the time they choose on their own. I use changes in minimum school-leaving laws in Great Britain and Ireland, which were remarkably influential, to measure pecuniary and non-pecuniary gains from education. I find, similar to previous studies, students compelled to take an extra year of schooling experienced an average increase of 12 percent in annual earnings. I also find significant effects from education on health, leisure and labor activities, and subjective measures of well-being, which hold up against a wide array of specification checks. Comparing these estimates with intertemporal models of educational choice, the main conclusion of this paper is that it is very difficult to justify an optimal decision to drop out early without the presence of time inconsistent preferences, misguided expectations, or disutility from identifying with a social group that considers dropping out the norm. To prefer dropping out early, the one-year cost from attending school would have to exceed a dropout<92>s maximum lifetime annual earnings by a factor of about six.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number oreo-03-01.

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Length: 63 pages
Date of creation: 11 Jul 2003
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Handle: RePEc:tor:tecipa:oreo-03-01

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Related research
Keywords: social returns to education; identity; happiness; compulsory school laws;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Angrist, Joshua D & Krueger, Alan B, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 979-1014, November. [Downloadable!] (restricted)
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  2. Ted O’Donoghue & Matthew Rabin, 2001. "Risky Behavior among Youths: Some Issues from Behavioral Economics," NBER Chapters, in: Risky Behavior among Youths: An Economic Analysis, pages 29-68 National Bureau of Economic Research, Inc. [Downloadable!]
  3. Stacey H. Chen, 2002. "Is Investing College Education Risky?," Labor and Demography 0202001, EconWPA. [Downloadable!]
  4. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  5. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December. [Downloadable!] (restricted)
  6. Ted O'Donoghue & Matthew Rabin, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March. [Downloadable!] (restricted)
  7. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December. [Downloadable!] (restricted)
  8. Adriana Lleras-Muney, 2002. "The Relationship Between Education and Adult Mortality in the United States," NBER Working Papers 8986, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June. [Downloadable!] (restricted)
  10. Jonathan Gruber & Sendhil Mullainathan, 2002. "Do Cigarette Taxes Make Smokers Happier?," NBER Working Papers 8872, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Lance Lochner & Enrico Moretti, 2001. "The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports," NBER Working Papers 8605, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. J. Dominitz & C. F. Manski, . "Using expectations data to study subjective income expectations," Institute for Research on Poverty Discussion Papers 1050-94, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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  13. Ariel Rubinstein, 1987. "Similarity and Decision-Making Under Risk (Now published in Journal of Economic Theory, 46 (1988), pp.145-153.)," STICERD - Theoretical Economics Paper Series 162, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  14. Brunello, Giorgio & Comi, Simona & Lucifora, Claudio, 2000. "The College Wage Gap in 10 European Countries: Evidence from Two Cohorts," IZA Discussion Papers 228, Institute for the Study of Labor (IZA). [Downloadable!]
  15. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
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  16. Micklewright, J & Mark Pearson & Stephen Smith, 1989. "Has Britain an early school-leaving problem?," Fiscal Studies, Institute for Fiscal Studies, vol. 10(1), pages 1-16, February.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Black, Sandra E. & Devereux, Paul J. & Salvanes, Kjell G., 2004. "Fast Times at Ridgemont High? The Effect of Compulsory Schooling Laws on Teenage Births," IZA Discussion Papers 1416, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Bruno S. Frey & Alois Stutzer, . "Happiness Research: State and Prospects," IEW - Working Papers iewwp190, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  3. Philip Oreopoulos, 2003. "Do Dropouts Drop Out Too Soon? International Evidence From Changes in School-Leaving Laws," NBER Working Papers 10155, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Philip Oreopoulos & Marianne E. Page & Ann Huff Stevens, 2003. "Does Human Capital Transfer from Parent to Child? The Intergenerational Effects of Compulsory Schooling," NBER Working Papers 10164, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital," American Economic Review, American Economic Association, vol. 95(1), pages 437-449, March. [Downloadable!]
    Other versions:
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