Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316921 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11807
Publisher: 
CESifo GmbH, Munich
Abstract: 
I study how transitory increases in the opportunity cost of schooling affect dropout rates and long-run outcomes. Exploiting a tax-free year in Iceland and comparing teenagers around compulsory schooling age, I document increased dropout rates and a permanent loss in educational attainment for men, but not women. Consequently, they experience substantial lifetime earnings losses, enter occupations with limited career advancement, and have reduced marriage and fertility. Dropouts predominantly come from low-education - but not low-income - families and neighborhoods, consistent with misperceptions about the returns to education. The findings suggest that temporary economic booms can permanently reduce aggregate human capital accumulation.
Subjects: 
educational attainment
opportunity cost
labor supply
tax reform.
JEL: 
H24
I21
I26
J16
J24
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.