The role of local labour market conditions and pupil attainment on post-compulsory schooling decisions

Abstract

This paper assesses the role of local labour market conditions and youth educational attainment as primary determinants of the post-compulsory schooling decision. Through the specification of a nested logit model, the restrictive IIA assumption inherent in the multinomial logit (MNL) model is relaxed across multiple unordered outcomes. Using data from Longitudinal Study of Young People in England (LSYPE), our analysis shows that the factors influencing schooling decisions differ for males and females. For females, on average, the key drivers of the schooling decision are expected wage returns based on youth educational attainment, attitudes to school and parental aspirations, rather than local labour market conditions. However, for males, higher local unemployment rates encourage greater investment in education.