Unemployment and Early School Leaving

Economic theory suggests that unemployment could affect human capital investment decisions in either direction. The authors use microdata on sixteen year-olds from the U.K. Family Expenditure Survey to examine the effects of household circumstances and regional unemployment rates on early school leaving in the United Kingdom between 1978 and 1984. During this period, unemployment rose rapidly and the proportion of pupils choosing to stay on at school beyond the age at which education was compulsory also increased from its historically low level. However, no evidence was found supporting the theory that unemployment caused this rise.