School Dropouts and Economic Growth: A Cross-Country Analysis

Abstract

Development in human capital in the form of public education and health provision is necessary for the development of a country. Most cross-country studies on the effect of schooling on education emphasize the importance of school dropouts. This paper analyses the determinants of the dropout rates at various levels using a panel of 138 countries. We consider three definitions of school dropouts - at the primary school level, between primary and secondary school and at the secondary school level. We find that income and government spending generally has a significant effect on school dropout rates. The stock of adult education is significant in reducing the dropout rates at the primary school level whereas the impact is just the reverse for the dropout rates at the secondary school level. Political instability in the country also exerts some impact on the dropout rates. Correcting for the potential endogeneity of income we find that the reverse causation argument holds only for dropouts at the primary school level.