Connecting Disadvantaged Communities to Work and Higher Education Opportunities: Evidence from Public Transportation Penetration to Arab Towns in Israel

Disadvantaged communities are often geographically segregated from employment and higher education opportunities. Increasing access can entail substantial welfare gains, but this can also affect the tradeoff faced by young adults between investing in higher education and working for pay. We evaluate the introduction of bus services to Arab towns in Israel, which substantially and differentially increased access either to work only or to work and higher education opportunities among a disadvantaged population. Exploiting the variation that different bus line connections created in the opportunity cost of schooling, we find that young adult responses are consistent with a tradeoff between investing in higher education and working for pay. For females, under certain circumstances, there is a simultaneous decrease in both labor market and educational attainment outcomes. We argue that this is due to a combination of a household income effect and social stigma that is associated with female labor force participation. Our results demonstrate the importance of accounting for potential reductions in educational attainment when expanding work opportunities to disadvantaged communities and that traditional barriers can play a large role in female integration into the labor market.