Jan 29, 2013

Economics of education: college dropout

From a paper by Stinebrickner & Stinebrickner (Journal of Labor Economics, October 2012): 
Research examining the educational attainment of low-income students has often focused on financial factors such as credit constraints. We use unique longitudinal data to provide direct evidence about a prominent alternative explanation—that departures from school arise as students learn about their academic ability or grade performance. Examining college dropout, we find that this explanation plays a very prominent role; our simulations indicate that dropout between the first and second years would be reduced by 40% if no learning occurred about grade performance/academic ability. The article also contributes directly to the understanding of gender differences in educational attainment.
The authors explain:
As one example, our finding that students are, on average, substantially overoptimistic about grade performance at the time of entrance has a direct bearing on conclusions about the option value of schooling (Manski 1989; Altonji 1993; Cunha et al. 2005; Stange 2012).
They conclude:
Improvements in the quality of elementary and secondary schools would seemingly be helpful, but ensuring that precollege students have correct perceptions about the level of preparation necessary to succeed in college may be important for increasing student effort at earlier stages of schooling.

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