Why Youths Drop Out of High School: The Impact of Preferences, Opportunities, and Abilities

In this paper, we structurally estimate a sequential model of high school attendance and work decisions. The estimates imply that youths who drop out of high school have different traits than those who graduate, e.g., they have lower school ability and/or motivation, lower expectations about the rewards from graduation, and a comparative advantage at jobs that are done by non-graduates. We also found that working while in school reduces school performance. However, policy experiments indicate that even a complete prohibition on working would have a limited impact on the high school graduation rates of white males.