Longer schooling with grade retention: The effects of increasing the school leaving age on dropping out and labour market success

Abstract

This paper examines the effects of increasing the compulsory school leaving age from 16 to 18 in Hungary using a difference-in-regression-discontinuities design empirical strategy. While the reform increased the length of schooling, it did not decrease the probability of dropping out of secondary school, either on average or among the most at-risk group of Roma ethnic minority students. Due to grade retentions, marginal students were older than their peers and couldn't have reached the final grade of secondary school by age 18 to earn a degree. The reform also did not affect the probability of employment, hours worked, wages and the probability of working in low-skilled occupations at ages 20 and 25. In education systems that allow grade retention, compulsory education should have the explicit goal of keeping students in school until they earn a secondary degree, rather than just until a certain age.