The effects of labor market opportunities on education: The case of a female hiring ceiling in Iran

Abstract

This paper estimates the effects of reduced labor market opportunities on women’s college education outcomes. To do so, we exploit discontinuity generated by a 2010 policy in Iran limiting female hiring in the public sector, which greatly worsened employment opportunities for college-educated women. We find that the reform immediately reduced women’s college attendance by 11.4% points while it slightly increased men’s college attendance. We also find that it decreased women’s enrollment in college majors wherein employment probabilities are more reduced after the reform. In contrast, we do not observe any significant impact on other outcomes, including high school education decisions, labor supply patterns of high school graduates, and spillover effects into the private sector labor market. Lastly, we note that those who do not attend college are more likely to get married and/or have children at younger ages. This paper shows labor market returns as an important determinant of education pursuit even in a country, where the society is highly conservative and women’s employment possibilities are low.