Schooling returns, schooling decisions and educational finance

Abstract

Given the presence of significant returns to education, it would seem logical to query why individuals choose to leave school early. This paper examines the evidence on this issue, dealing with both methodological and evidence-based findings. Drawing on existing research in the area of schooling returns, the evidence and deficiencies of the literature are explored in an effort to quantify the scale of the private return to education. The schooling decision is subsequently examined more closely, so as to investigate the effect of variables such as family income on that choice. Proposed educational finance solutions are then surveyed. Specifically, this paper reports on an experimental approach in the UK, which pays allowances to households and individual students for participation in education, thus reducing the opportunity cost of staying on at school. Finally, estimates are presented, based on an analysis of non-experimental UK data, of the probability of early school leaving, conditional on named variables.