Ebook Ability, Parental Valuation of Education and the High School Dropout Decision
The strong correlation between family socio-economic status and dropping out of high school is well known (e.g., Eckstein and Wolpin, 1999 for the U.S. and Belley, Frenette, and Lochner, 2008 for Canada). In the Canadian data we describe below, teenage boys with two parents who are themselves high school dropouts have a 16% chance of dropping out, compared to a dropout rate of less than 1% for boys whose parents both have a university degree. This cross generational correlation is of interest for two reasons. First, to the extent it reflects higher ability individuals dropping out of high school, it may imply a social efficiency loss. Second, understanding this correlation is important when thinking about redistribution. Our goal in this paper is to provide a better understanding of the source of the socio-economic gradient in dropping out of high school.
There is a rich literature examining the high school dropout decision, particularly for the US. In papers dating back to the 1960s, researchers developed variants of what came to be called the ‘Wisconsin Model’ of educational and occupational attainment (e.g., Sewell, Haller, and Portes, 1969, Alexander, Eckland, and Griffin, 1975 and Haveman, Wolfe, and Spaulding, 1991). A key element of this model was its emphasis on the development of educational aspirations during adolescence and the importance of parents and peers in shaping those aspirations. Parental aspirations for their children were seen to be of particular importance (see for example Davies and Kandel (1981)). Recent work by Attanasio and Kaufmann (2009) also suggests that parental expectations and influences have a non-negligible effect on early education decisions. We provide further evidence that parental aspirations are strongly correlated with dropping out of high school. However, the interpretation of these results is complicated. Parents’ answers to questions about the level of education they ‘hope’ their child will attain could reflect their own valuation of education in general, or an assessment of their child’s own capabilities, or some combination of the two. If they reflect the former, this suggests policy responses targeting how parents or others influence students. If, instead, the answers reflect insider knowledge about a child’s own abilities, then policies should focus on how to generate those abilities in the first place.
Within the more recent economics literature, Eckstein and Wolpin (1999) use a structural dynamic choice framework to examine dropping out in the US. They find that dropouts have lower ability and motivation as well as lower expectations about rewards from graduation. Todd and Wolpin (2006) investigate the form of the production function for cognitive skills using data from the NLSY79 Children Sample, focusing on implications for racial gaps in test scores. They find that mother’s ability (as measured by the AFQT test) has a large impact on test score outcomes.
Cunha and Heckman, (2007, 2008) and Cunha, Heckman, and Schennach (2006) hereafter, CH07, CH08, and CHS, respectively – investigate the production of both cognitive and non cognitive abilities using dynamic factor models. As in Heckman, Stixrud, and Urzua (2006), they find that both cognitive and non-cognitive skills are important determinants of dropping out of high school. They also include the type of home environment variables used in Todd and Wolpin (2006), but while Todd and Wolpin combine these variables in a fixed index, CH08 and CHS estimate weights to combine the variables into what they call a parental investment factor. They find that parental investments are important determinants of skill formation and, through them, of high school graduation, with investments having more impact on cognitive abilities at young ages and on non-cognitive abilities at older ages. We view the questions underlying these home environment or investment indexes as partly reflecting the parents’ underlying valuation of education and the associated returns, defined in terms of both pecuniary and non-pecuniary benefits. Hence, this paper is an attempt to investigate the nature of family traits underlying the differences in parental investments which these earlier papers have shown to be an important determinant of high school graduation.
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