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Ability, Parental Valuation of Education and the High School Dropout Decision

  • Foley, Kelly
  • Gallipoli, Giovanni
  • Green, David A.

We use a large, rich Canadian micro-level dataset to examine the channels through which family socio-economic status and unobservable characteristics affect children's decisions to drop out of high school. First, we document the strength of observable socio-economic factors: our data suggest that teenage boys with two parents who are themselves high school dropouts have a 16% chance of dropping out, compared to a dropout rate of less than 1% for boys whose parents both have a university degree. We examine the channels through which this socio-economic gradient arises using an extended version of the factor model set out in Carneiro, Hansen, and Heckman (2003). Specifically, we consider the impact of cognitive and non-cognitive ability and the value that parents place on education. Our results support three main conclusions. First, cognitive ability at age 15 has a substantial impact on dropping out. Second, parental valuation of education has an impact of approximately the same size as cognitive ability effects for medium and low ability teenagers. A low ability teenager has a probability of dropping out of approximately .03 if his parents place a high value on education but .36 if their education valuation is low. Third, parental education has no direct effect on dropping out once we control for ability and parental valuation of education. Our results point to the importance of whatever determines ability at age 15 (including, potentially, early childhood interventions) and of parental valuation of education during the teenage years. We also make a small methodological contribution by extending the standard factor based estimator to allow a non-linear relationship between the factors and a covariate of interest. We show that allowing for non-linearities has a substantial impact on estimated effects.

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File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2060%20-%20Foley,%20Gallipoli,%20Green.pdf
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Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2010-14.

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Length: 60 pages
Date of creation: 30 Apr 2010
Date of revision: 30 Apr 2010
Handle: RePEc:ubc:clssrn:clsrn_admin-2010-14
Contact details of provider: Web page: http://www.clsrn.econ.ubc.ca/

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  1. Flavio Cunha & James Heckman & Susanne Schennach, 2010. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," NBER Working Papers 15664, National Bureau of Economic Research, Inc.
  2. Pedro Carneiro & Costas Meghir & Matthias Parey, 2010. "Maternal education, home environments and the development of children and adolescents," CeMMAP working papers CWP39/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Cunha, Flavio & Heckman, James J., 2007. "The Technology of Skill Formation," IZA Discussion Papers 2550, Institute for the Study of Labor (IZA).
  4. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute for the Study of Labor (IZA).
  5. Carneiro, Pedro & Hansen, Karsten T. & Heckman, James J., 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," IZA Discussion Papers 767, Institute for the Study of Labor (IZA).
  6. Gianluca Violante & Giovanni Gallipoli & Costas Meghir, 2005. "Education Decisions, Equilibrium Policies and Wages Dispersion," 2005 Meeting Papers 522, Society for Economic Dynamics.
  7. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Working Papers 200827, Geary Institute, University College Dublin.
  8. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc.
  9. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
  10. Michael B Coelli, 2009. "Parental Job Loss, Income Shocks and the Education Enrolment of Youth," Department of Economics - Working Papers Series 1060, The University of Melbourne.
  11. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  12. Jere R. Behrman & Mark R. Rosenzweig, 2002. "Does Increasing Women's Schooling Raise the Schooling of the Next Generation?," American Economic Review, American Economic Association, vol. 92(1), pages 323-334, March.
  13. Orazio Attanasio & Katja Kaufmann, 2009. "Educational Choices, Subjective Expectations, and Credit Constraints," NBER Working Papers 15087, National Bureau of Economic Research, Inc.
  14. Chamberlain, Gary, 1977. "Education, income, and ability revisited," Journal of Econometrics, Elsevier, vol. 5(2), pages 241-257, March.
  15. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
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