Academic performance, childhood economic resources, and the choice to leave school at age 16

A general international observation is that adolescents from disadvantaged families are more likely to leave school at age 16. In this paper we extend the literature on school-leaving decisions by using a new and extensive panel data set from New Zealand; and by examining the effect of family income, and personal and environmental characteristics since childhood on both academic performance and subsequent schooling choices. Results obtained from single equations and joint estimation, allowing for possible endogeneity of academic performance, reveal the importance of the role of academic performance in models of demand for education. Several factors that are at work for a long time, such as household income at different points in time, influence the school-leaving decision through academic performance. These results point to the role that stimulating academic performance can play in breaking cycles of disadvantage.