The True Effect of Students’ Employment on the Duration of Studies

Abstract

We examine the effect of the first-degree students' employment on the prolongation of their studies. When employing a popular instrumental variable, the regional unemployment rate, we find a negative impact of students' employment on duration of studies. Then, adding a predetermined IV - the individual's employment prior to the beginning of academic studies - turns the estimate positive. Furthermore, we find that the relationship between the extent of students’ employment and duration of their studies depends on their age: among the younger students (aged 22-26), the extent of employment has no effect on the duration of studies, while among the older students the effect is positive and statistically significant.

Keywords: earnings, undergraduate studies, instrumental variable

JEL Classification: I21, J22