"School’s out for summer, school’s out forever": the long-term health consequences of leaving school during a bad economy

This paper investigates whether leaving school in a bad economy deteriorates health in the longrun. We focus on individuals in England and Wales who left full-time education in their last year of compulsory schooling immediately after the 1973 oil crisis. Our identification strategy builds on two sources. First, it relies on the comparison of very similar individuals – born the same year – whose school-leaving behaviour in different economic conditions was exogeneously induced by compulsory schooling laws. More specifically, within a same birth cohort, pupils born at the end of the calendar year (September to December) were forced to leave school almost a year later than pupils born earlier in the year (January to August). Second, we exploit the sharp increase in unemployment rates generated by the 1973 oil crisis. Between 1974 and 1976, each school cohort indeed faced worse economic conditions at labour-market entry than the previous one. Unlike school-leavers who did postpone their entry on the labour market during the 1980s and 1990s recessions, we provide evidence that pupils’ decisions to leave school at compulsory age between 1974 and 1976 were not endogeneous to the contemporaneous economic conditions at labour market entry. We use a repeated cross section of individuals over 1983-2001 from the General Household Survey (GHS) and take a life-course perspective, from 7 to 26 years after school-leaving. Our results show that men who left school in a bad economy have a higher probability of smoking over the whole period (1983-2001) and of having ever smoked. Women who left school in a bad economy are more likely to report poorer health over the whole period under study. They also have a higher probability to restrict their activity due to illness or injury and to consult the General Practitioner. We do not find any significant effects of poor economic conditions at labour-market entry on subsequent labour-market, marriage and fertility outcomes.