The Trade‐Off Between Work and Education: Evidence from Public Transportation Penetration to Arab Towns in Israel

Disadvantaged communities are often geographically segregated from employment and higher education opportunities. Increasing access can entail substantial welfare gains, but this can also affect the trade‐off faced by young adults between investing in higher education and working for pay. We evaluate the introduction of bus services to Arab towns in Israel, which substantially and differentially increased access either to work only or to work and higher education opportunities among a disadvantaged population. Exploiting the variation that different bus line connections created in the cost of accessing higher education institutions, we find that young adult male responses are consistent with a trade‐off between investing in higher education and working for pay. For females, our results are less clear‐cut and while there is evidence of responses in terms of the probability of currently studying, we do not observe sufficiently concise labor market responses. Our results demonstrate the importance of accounting for potential reductions in educational attainment when expanding work opportunities to disadvantaged communities.