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The Importance of Observing Early School Leaving and Usually Unobserved Background and Peer Characteristics in Analysing Academic Performance

  • Guyonne Kalb

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Sholeh A. Maani

    (Department of Economics, The University of Auckland)

In this paper, we use a recent panel data set from New Zealand to examine the link between the academic performance and the decision by teenagers to drop out of school before exams at the end of year 10. These choices have significant lifetime economic impacts, since early school leaving in many cases closes pathways to further education. We address endogeneity and error correlation of potential performance in national examinations and school-leaving choices prior to exams. Birth month provides an instrument used in the equation for drop out, because those born in particular months can legally leave school before the exam takes place, whereas the other students cannot. The analyses incorporate the effect of academic ability (childhood IQ), parental education, family resources at different points in time while the child is growing up, and school and peer characteristics. The results show that those who drop out early are unlikely to have performed well in the exam. The predicted difference between those who drop out or continue, at least up to their exam, is almost completely explained by observed factors. Leaving out those variables which are often not available in other datasets (such as childhood IQ, childhood family resources and teenage peer effects), we find that the unobserved factors in academic performance and early school leaving are correlated. It is found that beyond childhood IQ and family resources, teenage peer and school factors have additional and significant associations with grade outcomes. This has important policy implications.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2007n05.

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Length: 31 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:iae:iaewps:wp2007n05
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
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Web page: http://www.melbourneinstitute.com/
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  1. Rice, Patricia G, 1987. "The Demand for Post-compulsory Education in the UK and the Effects of Educational Maintenance Allowances," Economica, London School of Economics and Political Science, vol. 54(216), pages 465-75, November.
  2. Paul Gregg & Stephen Machin, 1998. "Child development and success or failure in the youth labour market," LSE Research Online Documents on Economics 20261, London School of Economics and Political Science, LSE Library.
  3. David Card & Jesse Rothstein, 2006. "Racial Segregation and the Black-White Test Score Gap," NBER Working Papers 12078, National Bureau of Economic Research, Inc.
  4. Borland, J. & Kennedy, S., 1998. "Earnings Inequality in Australia," CEPR Discussion Papers 389, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  5. Ermisch, John & Francesconi, Marco, 2001. "Family Matters: Impacts of Family Background on Educational Attainments," Economica, London School of Economics and Political Science, vol. 68(270), pages 137-56, May.
  6. Maani, Sholeh A. & Kalb, Guyonne, 2007. "Academic performance, childhood economic resources, and the choice to leave school at age 16," Economics of Education Review, Elsevier, vol. 26(3), pages 361-374, June.
  7. Feinstein, Leon & Symons, James, 1999. "Attainment in Secondary School," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 300-321, April.
  8. Micklewright, John, 1989. "Choice at Sixteen," Economica, London School of Economics and Political Science, vol. 56(221), pages 25-39, February.
  9. David M. Blau, 1999. "The Effect Of Income On Child Development," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 261-276, May.
  10. Robert Haveman & Barbara Wolfe, 1995. "The Determinants of Children's Attainments: A Review of Methods and Findings," Journal of Economic Literature, American Economic Association, vol. 33(4), pages 1829-1878, December.
  11. Rothstein, J.M.Jesse M., 2004. "College performance predictions and the SAT," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 297-317.
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