Abstract
This paper investigates the labor market impacts of a reform that universally lowered the school leaving age from 18 to 16 in Hungary. Using a difference-in-cross-cohort-comparisons approach and administrative panel data, we find that the policy increased the likelihood of dropping out from school among individuals aged 16 to 18, without a corresponding increase in employment. Employed dropouts were predominantly employed in low-skilled occupations. These results are driven by lower-SES students and suggest that the policy had adverse effects on human capital formation, did not improve labor market integration, and increased inequality.
Keywords: Education, reform, employment, school leaving age
JEL classification: I21,J13,J16,J24