Macro Shocks and Schooling Decisions: The Case of Argentina

Graciana Rucci, University of California, Los Angeles

This paper asks how households deal with severe, unexpected, nationwide shocks. In particular, I look at whether youths drop out of school in order to work. The data come from the Argentine Permanent Household Surveys for 1996 to 2002, and the shock is the economic crisis, which began at the end of 1998. I find that real household income fell by 50% and that the shock also led to a decline in schooling of 4.2 to 11% for 12 to 17 year olds. But this decline in schooling attendance was not evenly distributed across groups. Children with highly educated heads actually increased their probability of attendance by 4.2 to 17.4%, while youths with less educated heads reduced their probability of attendance by 3.1 to 18.4%. These results may exacerbate income inequality in Argentina in the longer-term, if the youths do not return to school.