Using data from a panel (N = 4,141) tested in the seventh grade and again as young adults as input to the LISREL VII program, we estimated a theoretically informed model specifying effects of failure to finish high school on the latent construct psychological functioning during young adulthood, controlling for the effects of psychological functioning in the seventh grade, gender, father's education, and race. The results suggest a significant negative effect of not graduating on psychological functioning. This observed adverse effect of dropping out on psychological functioning could not be accounted for solely by deprivation of a college education because we observed the same effect when considering only subjects who did not go on to college (n = 1,675).
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Kaplan et al. (1994) studied this question.
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