Chapter 4: School-leaving and unemployment: evidence from Spain and the UK
María Jesús San Segundo and Barbara Petrongolo1 1. INTRODUCTION In the second half of the twentieth century, primary and secondary education became practically universal in most developed countries. OECD research (1998, 2001) has recently concluded that there is a clear tendency towards convergence in human capital stocks, at least for some basic indicators such as the percentage of the population completing secondary education. European countries have mostly followed this general tendency. The COM (1993) Report (White Paper) established ambitious goals for EU countries to reach human capital levels similar to those of their main economic competitors. Recent summits have reinforced the objective of raising Europe’s competitive position in the knowledge society. However, available data shows that several European countries still face significant challenges. Of special relevance here are the ongoing deficits in upper-secondary completion rates for young generations. The Annual Employment Reports show that progress is uneven among member countries, with regard to the objectives of promoting lifelong learning and reducing early school-leaving (COM, 2000). In this chapter we investigate the main determinants of the decision to stay on at school at age 16, with special emphasis on the role played by local labour market conditions. On the one hand, it can be argued that high unemployment rates drive young people to postpone their labour market entrance, by reducing the expected gains from job search and therefore the opportunity cost of their educational investment. This produces a positive effect of current youth unemployment on the probability of staying...
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