From educational reforms to skills in the labour market: The case of Spanish adults

This study examines the long-term consequences of early school leaving and years of education on adult cognitive skills in Spain. Using an instrumental variable approach that leverages historical policy reforms—introducing minimum compulsory dropout school-leaving ages of 14 and later 16—we isolate the influence of dropout and education on literacy and numeracy skills. The analysis of data from the Programme for the International Assessment of Adult Competencies (PIAAC) 2012 and 2023 reveals that, when accounting for bias due to endogeneity, early school leavers may suffer significant declines in cognitive performance, with literacy scores dropping 1.72 standard deviations (SDs) and numeracy scores falling by 1.64 SDs. Furthermore, 1 year of additional education (above the average) appears to significantly raise cognitive performance by 0.26 SDs in literacy and 0.21 SDs in numeracy. However, we remain cautious with the interpretations, as secular trends may be present in our instrument. Associations reinforce that the accumulation of formal education is essential for skill development, emphasising the need for policies aimed at reducing (increasing) dropout rates (years of education) of the population, while considering the heterogeneity across socio-economic groups.