Learning about Academic Ability and the College Drop-out Decision,” NBER working paper #14810

Abstract: Much empirical research examining the (relatively) low levels of educational attainment of students from low income families has focused on the role of financial factors such as credit constraints. In this paper we use unique longitudinal data to provide some of the first direct evidence about one of the most prominent alternative explanations- that departures from school arise as students learn about their academic ability or grade performance. Examining college drop-out, we find that learning about grade performance/ability plays a very prominent role; our simulations suggest that drop-out between the first and second years of college would be reduced by approximately 40 % if no learning occurred about these factors. The paper also contributes directly to the understanding of gender differences in educational attainment. 1Describing the traditional difficulties of understanding the underlying reasons for college drop-out, Bowen and Bok (1998) write, “One large question is the extent to which low national graduation rates are due to the inability of students and their families to meet college costs, rather than to academic difficulties or other factors. ” Tinto (1975) suggests that drop-out is related to academic and social integration, but direct tests of this are scarce (Draper, 2005). 1 I