Labor Markets, Academic Performance and the Risk of School Dropout : Evidence for Spain

Labor market dynamics and the expectations of finding a job are believed to be strong determinants of individuals' educational decisions. Thus, the academic performance and permanency of students in the school system are closely related to their perceptions of unemployment. The impact of high unemployment rates on schooling decisions may operate through, at least, two effects: a “family” effect, which urges individuals to dropout owing to limited access to educational resources, and a “local labor market” effect that encourages them to remain in school. In this paper we, specifically, analyze the impact of a household's labor market situation and the effect of local labor unemployment on i) the risk of early school dropout and ii) academic performance, which typically declines before the decision to dropout is taken. These relations are assessed via a set of multilevel linear and logistic regression analyses using PISA 2006, 2009 and 2012 microdata. Results suggest that both parental unemployment and local labor market unemployment increase the risk of school dropout by reducing student academic performance. However, the negative “family” and “local labor market” effects seem to decrease as labor market conditions worsen