Determinants of high returns and low rates of high school completion in Brazil

Abstract

This study estimates wage returns associated with secondary education among young adults aged 20–24 years in Brazil, focusing on the role of secondary school scarcity as a barrier to attendance. We employ instrumental variables derived from school density in the region where individuals resided at age 15. IV estimates are much higher than OLS (roughly five times higher). Complementary, first stage estimates indicate that greater school availability significantly increases secondary school completion rates. High commuting costs, due to the lack of schools, may interact with opportunity costs in a way that selects individuals out of the educational system with relatively high opportunity costs even when they would experience high returns at high school. In particular, we interpret our IV results as the effects of secondary schooling for those with commuting time restrictions. That could be an opportunity cost more bidding for women who tend to devote more time to household responsibilities than men. In fact, IV estimates for wage returns of secondary school were consistently higher for women across all instrumental variable specifications.