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Bumpy Rides: School to Work Transitions in South Africa


  • Pugatch, Todd

    () (Oregon State University)


Re-enrollment in school following a period of dropout is a common feature of the South African school to work transition that has been largely ignored in both the literature on South Africa and the wider literature on sequential schooling choice. In this paper, I quantify the importance of the option to re-enroll in the school to work transition of South African youth. I estimate a structural model of schooling choice in South Africa using a panel dataset that contains the entire schooling and labor market histories of sampled youth. Estimates of the model's structural parameters confirm the hypothesis that enrollment choices reflect dynamic updating of the relative returns to schooling versus labor market participation. In a policy simulation under which re-enrollment prior to high school completion is completely restricted, the proportion completing at least 12 years of schooling rises 6 percentage points, as youth who would have dropped out under unrestricted re-enrollment reconsider the long-term consequences of doing so. The results suggest that the option to re-enroll is an important component of the incentives South African youth face when making schooling decisions.

Suggested Citation

  • Pugatch, Todd, 2012. "Bumpy Rides: School to Work Transitions in South Africa," IZA Discussion Papers 6305, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6305

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    References listed on IDEAS

    1. Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2008. "Why has unemployment risen in the New South Africa?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 715-740, October.
    2. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, vol. 108(C), pages 169-183.
    3. David Lam & Cally Ardington & Nicola Branson & Murray Leibbrandt, 2013. "Credit Constraints and the Racial Gap in Post-Secondary Education in South Africa," NBER Working Papers 19607, National Bureau of Economic Research, Inc.
    4. David Lam & Murray Leibbrandt & Cecil Mlatsheni, 2008. "Education and Youth Unemployment in South Africa," SALDRU Working Papers 22, Southern Africa Labour and Development Research Unit, University of Cape Town.
    5. Heckman, James J. & Navarro, Salvador, 2007. "Dynamic discrete choice and dynamic treatment effects," Journal of Econometrics, Elsevier, vol. 136(2), pages 341-396, February.
    6. Edmonds, Eric V., 2006. "Child labor and schooling responses to anticipated income in South Africa," Journal of Development Economics, Elsevier, vol. 81(2), pages 386-414, December.
    7. Lam, David & Ardington, Cally & Leibbrandt, Murray, 2011. "Schooling as a lottery: Racial differences in school advancement in urban South Africa," Journal of Development Economics, Elsevier, vol. 95(2), pages 121-136, July.
    8. Arcidiacono, Peter, 2004. "Ability sorting and the returns to college major," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 343-375.
    9. Christian Belzil & Jörgen Hansen, 2002. "Unobserved Ability and the Return to Schooling," Econometrica, Econometric Society, vol. 70(5), pages 2075-2091, September.
    10. James J. Heckman & John Eric Humphries & Paul A. LaFontaine & Pedro L. Rodríguez, 2012. "Taking the Easy Way Out: How the GED Testing Program Induces Students to Drop Out," Journal of Labor Economics, University of Chicago Press, vol. 30(3), pages 495-520.
    11. Yamauchi, Futoshi, 2005. "Race, equity, and public schools in post-Apartheid South Africa: Equal opportunity for all kids," Economics of Education Review, Elsevier, vol. 24(2), pages 213-233, April.
    12. Kevin M. Stange, 2012. "An Empirical Investigation of the Option Value of College Enrollment," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 49-84, January.
    13. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
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    Cited by:

    1. Todd Pugatch, 2014. "Safety valve or sinkhole? Vocational schooling in South Africa," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-31, December.
    2. Björn Nilsson, 2017. "The School-to-work transition in developing countries," Working Papers DT/2017/07, DIAL (Développement, Institutions et Mondialisation).
    3. Nicholas Trachter, 2015. "Stepping stone and option value in a model of postsecondary education," Quantitative Economics, Econometric Society, vol. 6(1), pages 223-256, March.
    4. Kevin M. Stange, 2012. "An Empirical Investigation of the Option Value of College Enrollment," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 49-84, January.
    5. Susan Godlonton, 2016. "Employment Exposure: Employment and Wage Effects in Urban Malawi," Department of Economics Working Papers 2016-09, Department of Economics, Williams College.
    6. Tyler Ransom & Esteban Aucejo & Arnaud Maurel & Peter Arcidiacono, 2014. "College Attrition and the Dynamics of Information Revelation," 2014 Meeting Papers 529, Society for Economic Dynamics.
    7. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, vol. 108(C), pages 169-183.

    More about this item


    human capital investment; labor supply; youth unemployment; dynamic discrete choice; South Africa;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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