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High School Dropouts in Uruguay: A comparative profile

Research · June 2016

DOI: 10.13140/RG.2.2.25189.91362

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 High School Dropouts in Uruguay:
A comparative profile

Francisco Haimovich * and Emmanuel Vazquez **

Abstract

This paper contributes to the understanding of who drops out in Uruguay in order to
identify especially “at-risk” groups in the population. To that end, a quantitative profile of
individual and household characteristics associated with dropout is estimated, and
compared across time and countries. The results suggest that youths who are male, older,
living in rural areas, without both biological parents at home and with many siblings,
without access to Information and Communication Technologies, who are not the first-
born, and are endowed with lower household income as well as less educated and more
economically active parents have a higher probability of dropping out secondary school.
The importance of most of these characteristics to explain dropout has remained stable in
the last 25 years, with the main exception of income, whose relevance has decreased. The
analysis supports the thesis that parental education can be considered the main factor
associated to secondary dropout in Uruguay, a factor that may be seriously compromising
upward social mobility.

Keywords: school dropout, secondary education, Uruguay, Latin America

JEL codes: I21, J24

*
The World Bank.
**
CEDLAS, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
1. Introduction
Each year, thousands of children in Uruguay leave school before completing high-school.
Learning deficits that accumulate over time limiting student’s capacity to pass the courses,
irrelevant or unappealing content discouraging the acquisition of knowledge, low
perceptions or lack of information on the returns of schooling, poor school environments,
financial barriers, lack of access to schools, pregnancy, and the opportunity cost of working
at home or in the labor market are all factors that have been highlighted in the literature to
explain this phenomena (Cunningham et al. 2008, Behrman, de Hoyos, and Székely 2015,
Adelman and Székely 2016). The consequences of this dropout is a cause of serious
concern for the society as a whole, since lower educational attainment is not only related to
lower productivity and growth (Barro 2001, Krueger and Lindahl 2001), but also to lower
civic and social engagement, worse health outcomes and more violence (OECD 2010).
The problem of school dropout in Uruguay is particularly relevant during secondary
education. While primary education is almost universal, gross enrollment rates decline
steadily during secondary ages (Figure 1). An analysis of the distribution of secondary
dropouts aged 20-29 reveals that 43% of this dropout occurs right after finishing primary
education and right after the end of lower secondary education (Figure 2.a). This represents
an improvement with respect to the situation 50 years ago, when almost half of the students
who completed primary education dropped out right after finishing elementary school
(Figure 2.b). These long-term gains also become evident when the analysis is restricted to
the percentage of youths aged 12-17 who drop out school during secondary education.
Figure 3 shows that the secondary dropout rate has decreased almost six percentage points
since 1989. However, the stagnation of this trend during the last decade joint with the fact
that the secondary dropout rate in Uruguay is one of the highest in Latin America (Figure 4)
is an urgent call for policies aimed at avoiding that children leave school before completing
high-school.
This paper contributes to the understanding of who drops out in Uruguay in order to
identify especially “at-risk” groups in the population. The analysis focuses on secondary
school dropout for individuals aged 12-17, since school dropout starts chiefly at lower
secondary education. The results suggest that youths who are male, older, living in rural
areas, without both biological parents at home and with many siblings, without access to
Information and Communication Technologies, who are not the first-born, and are endowed
with lower household income as well as less educated and more economically active
parents have a higher probability of dropping out secondary school. The importance of
most of these characteristics to explain dropout has remained stable in the last 25 years,
with the main exception of income, whose relevance has decreased. The analysis supports
the thesis that parental education can be considered the main factor associated to secondary
dropout in Uruguay, a factor that may be seriously compromising upward social mobility.

2
The paper is organized as follows. Section 2 describes the data that are used. Section 3
presents a quantitative profile of individual and household characteristics associated with
dropout. In section 4, this quantitative profile is compared across time and with 17 Latin
American countries. Section 5 analyses the consequences of school dropout and section 6
explores the role of some aggregate determinants of dropout that were left out of the
previous analysis. Finally, section 6 concludes with a policy discussion of the results.

2. Data
This paper uses data from the Socio-Economic Database for Latin America and the
Caribbean (SEDLAC), developed by CEDLAS (Universidad Nacional de La Plata) and The
World Bank. SEDLAC is a database of microdata that puts together household surveys of
24 countries in Latin American and Caribbean (LAC). The database covers the 18 countries
in mainland Latin America and six countries in the Caribbean, mainly starting in the 1990s,
although it also presents information for previous decades in a few countries. All possible
efforts to assure comparability across countries and over time are made by using similar
definitions of variables in each country/year, and by applying consistent methods of
processing the data.
In Uruguay, SEDLAC microdata are based on the Continuous Household Survey (Encuesta
Continua de Hogares – ECH), conducted by the National Institute of Statistics of this
country. The survey collects information on dwelling and household characteristics, as well
as general characteristics, education and health of all household members, including their
income and occupational status. The geographical coverage of the ECH has expanded over
time until reaching national representativeness in 2006, when the survey was extended to
include rural areas. In SEDLAC, data from this survey have been harmonized for the period
1989-2014, and have been made comparable with the other 17 countries in Latin America.
As it was explained in the previous section, the analysis in this paper focuses on secondary
school dropout for individuals aged 12-17. In 2014, a total of 12,523 Uruguayan
individuals aged 12-17 were interviewed in the ECH, representing a population of 316,347
children. This sample is used in the next section to provide a profile of the individual and
household characteristics associated to secondary dropout. The profile is later compared
with the rest of Latin American countries using the SEDLAC harmonization of the
household surveys in these countries shown in Table 1. In all cases, the last year with data
available is used.

3. A profile of secondary dropout in Uruguay

While the percentage of individuals aged 12-17 who drops out school during secondary
education in Uruguay ascends to 11.1, this average masks significant differences in the

3
dropout rate among different groups in the population. Household surveys allow providing
a profile of who drops out by exploring differences associated to:
 Student’s characteristics (gender, age, race, country of origin)
 Family structure (number of parents at home, siblings, order of birth)
 Parent’s characteristics (participation in the labor market, education)
 Household's socioeconomic characteristics (income, area of residence)
 Educational resources available at home (pc, internet). 1

This section estimates both gross and net gaps in dropout rates associated to these
characteristics. Gross gaps are simple percentage differences in dropout rate across
different subgroups in the population. Since these gaps can be partially (and sometimes
totally) explained by other characteristics associated to belonging to a certain group, a
conditional approach that computes differences holding all other (observable)
characteristics constant is more informative. Therefore, both a linear probability model and
a probit model of secondary dropout are estimated in order to net out the effect of these
other variables. The resulting coefficient associated to each variable included in the model
can then be interpreted as a net gap. Tables 2 and 3 show the results of this conditional
approach, which are analyzed below.

3.1. Student’s characteristics and secondary dropout rate

Household surveys allow analyzing the relationship between some intrinsic student’s
characteristics and dropout. Figure 5 reveals that secondary dropout is higher for male,
older, black, and native students. The gender gross gap is almost 4 percentage points, with
9 percent of females and 13 percent of males aged 12-17 leaving school during secondary
education. Furthermore, the (unconditional) probability of dropping out grows strongly
with age: while only 1.5 percent of children leave secondary school at age 12, this
percentage rises to 26.8 percent at age 17. The figure also suggests that there are
differences associated with race and the country of origin of the student, since black and
native students are more prone to dropout high-school than white and immigrant children.

The conditional analysis shows that some of these gross gaps vanish after netting out the
effect of other observable variables. While gender and age gaps remain, the differences in
secondary dropout associated to being white or immigrant are no longer statistically
different from zero. This means that the differences in the dropout rate associated to the
migrant condition can be explained by differences in the race-age-gender composition of
the immigrant and native group of students, and that there is no racial net gap in the dropout
rate, since the gross gap disappear after controlling for socioeconomic characteristics.

1
While it would be desirable to analyze many other characteristics associated to secondary dropout, the
questions in the survey are limited and therefore they cannot be explored in this document.

4
However, the large gap favoring women, joint with the strong association of dropout with
age, is a noteworthy characteristic of the Uruguayan educational system.

3.2. Family structure and secondary dropout rate

Family structure has also been highlighted as a determinant of dropout. Having both
biological parents at home may be related to the amount of family support that youth
receive, while the number of siblings and the order of birth may be linked to the amount of
resources (including time) that parents “invest” in each child, as well as the responsibilities
that lies with each household member. Figure 6 shows that secondary dropout rate in
Uruguay is higher for students that do not have both biological parents at home and have
many siblings, while the first-born may enjoy a small advantage.

Since all these variables are interrelated, a conditional analysis is necessary to better
understand the causes behind these gaps. The probit and the linear probability model
confirm that dropout is lower for individuals who live with their biological parents, in
families that are not too large. The negative association between dropout and family size
when all other variables are controlled for appears when 4 or more siblings are present in
the household. Moreover, the first-born may have an advantage over children who are born
in second place, since the probability of dropout is significantly higher for second-born
students with respect to those who are born in first place. This result is consistent with
recent evidence suggesting that firstborn children have higher aspirations, and that these
aspirations play a significant role in determining their higher levels of educational
attainment (Bu 2016). However, additional rigorous evaluations are necessary to confirm
this effect in the Uruguayan case.

3.3. Parents' characteristics and secondary dropout rate

Parents are one of the most important role models influencing individual behavior and
educational choices (Dryler 1998, Davis-Kean 2005, Vanassche et al. 2014). Well educated
parents know by their own experience the value of education and may transmit this value to
their children. Moreover, education is positively associated to higher incomes. As a result
of these and other factors, it is not surprising that the maximum educational level of a
child’s parents is strongly associated to the dropout decision. Figure 7 shows that while
secondary dropout rates are above 20 percent for children whose parents did not enroll in
secondary education, dropout falls with parental education until reaching 0.5 percent for
children with at least one parent who completed tertiary/university education. Furthermore,
despite parents that do not participate in the labor market have more time available for their
children, the figure shows that children with both parents economically active have lower
dropout rates than the rest of the students (a gross gap of around 5 percentage points). Since
parental economic activity is also related to household earnings, a conditional approach that

5
nets out the effect of income and other related variables is again more suited to understand
the factors underlying the dropout choice.

Both the linear probability model and the probit model in Tables 2 and 3 confirm the strong
association between parental education and secondary dropout rates. Even after controlling
for the fact that households with better educated parents have a higher income, a negative
association between parental education and dropout persists, although there is no significant
difference between students with parents who completed or did not complete primary
education. Regarding parental economic activity, a net gap favoring the 8 percent of
Uruguayan youngsters with no parent participating in the labor market is found. This could
be reflecting the effect of parents having more time to supervise their children and help
them overcome problems at school, but other explanations are also possible. 2

3.4. Household's socioeconomic characteristics –including educational

resources at home- and secondary dropout rate
Pursuing secondary education is costly. Both direct and indirect costs are involved in this
decision, since students do not only have to pay for textbooks, materials, transportation and
fees – in case of attending a private school – but also bear the opportunity cost of working
at home or in the labor market. These costs may be especially difficult to meet by poor
households. Not for nothing Conditional Cash Transfer programs have rapidly expanded in
Latin America (Fiszbein et al. 2009) and scholarships have also been implemented to help
the poor and those living in rural areas. In the case of students living in rural areas, a
conjunction of several factors may combine to make the dropout more likely. On the one
hand, income is lower in rural areas, and children and adolescents’ help is usually needed in
agricultural tasks. On the other hand, students in these areas sometimes have to cover long
distances to go to school, which are usually poorly equipped (Alcázar, Rendón, and
Wachtenheim, 2002).

Figure 8 shows the secondary dropout rate by quintile of household per capita income and
area of residence. The dropout rate among the students who belong to the poorest 20 per
cent of the population ascends to 16.7 and falls almost linearly with income until reaching
1.3 for the richest quintile. This negative association between income and dropout is
confirmed in the conditional analysis of Tables 2 and 3. 3 In general terms, the strength of
the association is not as strong as the one resulting from having better educated parents, a
fact that will be confirmed in the next section. Regarding the association between dropout
and location, a gross gap of 8.4 percentage points favoring students living in urban areas is

2
It is important to highlight that having no parent economically active does not imply being poor, although
poverty rates for these youngsters are higher than those for the rest of individuals aged 12-17 (49.6 vs. 35.6
using the official moderate poverty line).
3
Note that the relationship between household per capita income and secondary dropout in the linear
probability model is negative, albeit not statistically significant.

6
found, with rural secondary dropout almost doubling urban dropout rate. The net gap in
Table 2 reduces to 5.2, although if the marginal effect is allowed to vary depending on the
covariates (as in the probit model in Table 3), an even lower net gap is found for a student
with average characteristics.

While household income is important for the dropout decision per se, how the family uses
that money is at least as much as important. A higher household per capita income may or
may not translate into better educational resources at home, and a children or adolescent
benefits from accessing these inputs and reduces her chances of dropping out. Literature
has studied the effect of several inputs on learning outcomes, many of whom cannot be
considered in this paper due to lack of information in the Uruguayan Continuous
Household Survey (e.g. the number of books at home). However, the ECH has a special
module to capture Information and Communication Technologies (ICT) available at home
and the gross gaps associated to them can thus be computed (Figure 9). Children in families
with internet access and where internet is used have significantly lower dropout rates, a
finding that is confirmed in the conditional analysis of Tables 2 and 3. Furthermore, not
having a personal computer (pc) at home is strongly associated with dropout. The
secondary dropout rate for the minority of students who do not own a pc (a 5% of all the
students aged 12-17) is 41.3 per cent, and this gap is still very large and significant in the
conditional analysis. While this should not be interpreted as a casual effect, since there are
many unobservable factors associated to having a pc, the result is important enough to be
highlighted. 4

4. Comparing the profile across time and countries

The previous section allowed identifying especially “at-risk” groups in Uruguay, i.e.,
youths with a higher probability of dropping out secondary school. It was found that the
chances of dropping out high-school are significantly higher for youths who are male,
older, living without both parents at home and with many siblings, who are not the first-
born, and are endowed with lower household income as well as less educated and more
economically active parents. This section compares the strength of the association of these
factors with dropout across time and with the other Latin American countries. Other factors
that were also found to be important in the Uruguayan case (living in a rural area and ICT
resources available at home) are excluded from the analysis in this section, since data on
these characteristics are not available for all the countries and years under study. Due to this
limitation, a parsimonious linear probability model of secondary dropout is used to
compare the marginal effects of each factor with data available on the probability of
dropout. These marginal effects, presented in Tables 4 and 5 and Figures 10 and 11, capture

4
To have an educational resource may be associated, for instance, to have parents who really care about their
children’s education. Since there is no way to control for this unobservable factor in the conditional analysis,
the net gaps may be capturing both effects.

7
the change in the estimated probability of dropout associated to each variable, and provide
a measure of the importance of each variable to prevent school dropout.

Figure 10 shows the trends in the association between individual and household
characteristics and the secondary dropout rate in Uruguay for the period 1989-2014. The
solid line represents the coefficients associated to each variable included in the model in
Table 4, and the dashed lines show the corresponding 95% confidence interval. The figure
reveals that there is no factor whose importance has clearly grown. There are some factors
whose strength of association with dropout has decreased in the last 25 years (age and
income), others whose importance has not changed (gender, family size, and parental
education, as well as living in a single-parent family -which has not been statistically
different from zero except for a few years 5), and others that are currently significant but has
not always been different from zero (being a first-born, and having no parent economically
active).

Figure 11 compares the marginal effect of each of these variables in Uruguay in the year
2014 with respect to the other 17 countries in Latin America. The figure illustrates the
coefficients obtained in Table 5 and allows putting into context some of the results found in
the previous section. It reveals, for instance, that the net gap of 4 percentage points favoring
females that exists in Uruguay is not only high with respect to other factors under
consideration, but also the greatest gender gap in Latin America. It also shows that Uruguay
has the strongest association between school dropout and family size in the region, and one
of the highest marginal effects of age on the probability of secondary dropout.

The comparison across countries is also useful to understand whether some of the patterns
found above are specific to the Uruguayan case or more general. In this sense, Figure 11
reveals that the advantage of being a first-born child is not a particularity of the Uruguayan
education system, but a result consistent among all Latin American countries - although not
always statistically significant. It also shows that there is no significant association (at 1%
level) between single-parent families and dropout in any of the countries in the region.
Moreover, it confirms that there is a negative association between having no parent in the
labor market and the dropout rate in almost all countries in Latin America.

A pattern that deserves special attention -consistent among all the countries in the region-
shows that despite income is negatively related to the dropout rate, the importance of this
factor is not as high as parental education. Having better educated parents is strongly
associated to a lower probability of dropout, even more than household income. In
Uruguay, a one standard deviation increase in the household per capita income is associated

5 Due to limitations in the questions that are made in the household surveys, the number of biological parents
at home cannot be identified in all the countries and years. Therefore the single-parent variable used in the
model in this section captures whether there is a household head and spouse at home, or only a household
head, which is different from having both, one, or no biological parent living with the children.

8
to a 1 percentage point reduction in the probability of dropout, while a one standard
deviation increase in the highest parental education is related to a 7 percentage point
reduction in the probability of dropout. Parental education can then be considered the main
factor associated to secondary dropout in Uruguay. Moreover, the fact that Uruguay has
one of the highest associations between parental education and school dropout in Latin
America, joint with the fact that the strength of this association has remained stable in the
last 25 years, reinforces the importance of this factor that may be seriously compromising
upward social mobility.

5. The consequences of secondary school dropout

This section discusses some of the consequences of school dropout. First, a descriptive
analysis of the labor market outcomes of the youth who decide to drop out is made, from
the perspective of an individual who compares costs and benefits of completing high-
school. Second, the cost of dropout for the society as a whole is estimated by making use of
microsimulation techniques.

5.1. The individual consequences of secondary school dropout

The opportunity cost of pursuing secondary education is a driving force of dropout. While
it is impossible to know the counterfactual of an individual who chooses to continue her
secondary education instead of dropping out, the labor market outcomes of other people
who have decided not to stay at school may be a point of reference for individuals who
have to make a decision. In this sense, if labor market opportunities for youth who drop out
high-school are not much different from those who just completed high-school, then the
opportunity cost of pursuing secondary education may be perceived as low, and can then be
considered a partial explanation of the high dropout rates prevailing in Uruguay.

Data reveals that this is not the case. Secondary dropouts face serious difficulties to enter
successfully into the labor market. Figure 12.a. shows how the individuals aged 12-17 who
drop out high-school are distributed among four statuses: working in the formal sector 6 (1.8
%), working in the informal sector (25.2%), unemployed (10.6%), and not working, not
studying and not looking for a job (62.4%). Restricting the analysis to secondary dropouts
aged 16-17 provide a similar picture: more than two thirds are ninis (from the Spanish phrase
“ni estudia ni trabaja”), and less than 3 per cent get a job in the formal sector. This initial
disadvantage persists in time, since unemployment and informality rates are higher for
secondary dropouts compared to individuals who completed high-school and did not
pursued higher education (Figure 13). This implies a higher vulnerability, since secondary
dropouts not only have a higher probability of being unemployed in case of an economic

6
The distinction between formal and informal jobs is made using a legal definition of informality, i.e. an
informal worker is someone without right to pension in her job.

9
recession, but they are also less covered against other shocks (e.g. illness, accidents at
work) due to their higher participation in informal markets.

The higher vulnerability in the labor market can be accepted by a risk-adverse agent in
exchange of a higher wage. However, secondary dropouts have lower wages than
individuals of the same observable characteristics who graduated from high-school and did
not pursue any further education. In fact, the return to completing secondary education in
Uruguay is one of the highest in Latin America. Figure 14 shows the returns to high-school
completion resulting from a Mincer equation estimated by Heckman full maximum
likelihood for the 18 countries in the region. The figure reveals that Uruguayan individuals
who completed high-school earn a 28.1 per cent higher hourly wage than individuals of the
same observable characteristics who dropped out secondary school. This result is preserved
even if we make a separate analysis for formal and informal markets (Figure 15) and we
look into different levels of unobserved skills (Figure 16). Provided the high secondary
dropout rate in Uruguay, the resulting economic cost of dropout in terms of forgone
earnings is substantial.

5.2. The consequences of school dropout for society

This section estimates the cost of dropout for society in terms of foregone earnings and
distributional outcomes (poverty and inequality). To that end, microsimulations are
performed to estimate the counterfactual distribution of income that would result from the
elimination of dropout. The methodology follows Gasparini, Marchionni and Sosa
Escudero (2005) and it is described below.

Let 𝐷𝑐 be the distribution of household per capita income 𝑦 among the 𝑁𝑐 individuals of
country c:

𝐷𝑐 = {𝑦1𝑐 , 𝑦2𝑐 , … , 𝑦𝑁𝑁 }

The household per capita income of individual i in country c (𝑦𝑖𝑖 ) is the household total
income (𝑦ℎ𝑐 ) divided by the number of members in the household (𝑛ℎ𝑐 ). Moreover,
household total income is the sum of both labor (L) and non-labor (NL) income of each
member in the household. Thus,
𝐿 𝑁𝑁
𝑦ℎ𝑐 ∑∀𝑗∈ℎ 𝑦𝑗𝑗 ∑∀𝑗∈ℎ�𝑦𝑗𝑗 + 𝑦𝑗𝑗 �
𝑦𝑖𝑖 = = =
𝑛ℎ𝑐 𝑛ℎ𝑐 𝑛ℎ𝑐
𝑁𝑁
Non-labor income 𝑦𝑖𝑖 is assumed to be exogenous, as well as the fertility decisions
𝐿
underlying 𝑛ℎ𝑐 . Labor income 𝑦𝑖𝑖 is given by the product of the number of hours worked
by person i (𝑙𝑖 ) and the perceived hourly wage 𝑤𝑖 :
𝐿
𝑦𝑖𝑖 = 𝑤𝑖 . 𝑙𝑖

10
 𝐿
Individual’s i labor income in country c (𝑦𝑖𝑖 ) can be written as a function F of a vector 𝑋𝑖𝑖
of individual observable characteristics affecting wages and employment, a vector 𝑒𝑖𝑖 of
unobservable characteristics, a vector 𝛽𝑐 of parameters that determine market hourly wages
and a vector 𝜆𝑐 of parameters that affect employment outcomes (participation and hours of
work):
𝐿
𝑦𝑖𝑖 = 𝐹(𝑋𝑖𝑖 , 𝑒𝑖𝑖 ; 𝛽𝑐, 𝜆𝑐 ) i = 1,…,N

It is then possible to simulate individual labor incomes by changing one or some arguments
in this equation. For instance, the following expression represents the labor income that
individual’s i would have earned in country c if the parameters determining wages had been
those of country c’, keeping all other things constant.
𝐿
𝑦𝑖𝑖 (𝛽𝑐′ ) = 𝐹(𝑋𝑖𝑖 , 𝑒𝑖𝑖 ; 𝛽𝑐′, 𝜆𝑐 ) i = 1,…,N
𝐿
More generally, let 𝑦𝑖𝑖 (𝑘𝑐′ ) be the simulated labor income of individual i resulting from
changing any set of arguments k in F. These incomes can be used to simulate the household
per capita income 𝑦𝑖𝑖 (𝑘𝑐′ ) for every i = 1,…,N, and a counterfactual distribution of income
can then be estimated as

𝐷𝑐 (𝑘𝑐′ ) = {𝑦1𝑐 (𝑘𝑐′ ), 𝑦2𝑐 (𝑘𝑐′ ), … , 𝑦𝑁𝑁 (𝑘𝑐′ )}

The contribution to the overall change in the distribution of a change in k between c and c’,
holding all else constant, can be obtained by comparing 𝐷𝑐 and 𝐷𝑐 (𝑘𝑐′ ). It is usual to make
the comparison in terms of some distributive indicator I. Therefore, the effect of a change
in argument k is defined by

𝐸𝑐 (𝑘𝑐 ′ ) ≡ 𝐼(𝐷𝑐 (𝑘𝑐 ′ )) − 𝐼(𝐷𝑐 )

In this section, 𝑘𝑐 ′ is the vector of observable characteristics 𝑋𝑖𝑖 where the only thing that
has changed is the level of education of each individual who has not completed secondary
education in Uruguay. It is assumed that none of these individuals dropped out school
before completing high-school and their level of education is thus complete secondary. To
summarize the impact of this change on the income distribution, three indicators are used:
Total income of the society, Gini index of inequality, and Poverty headcount ratio.
𝐿
To estimate the parameters 𝛽𝑐 and 𝜆𝑐 in F and be able to compute 𝑦𝑖𝑖 (𝑘𝑐′ ), a reduced form
of the labor decisions model originally proposed by Heckman (1974) is used. Specifically,
a model for wages and hours of work is specified, estimating the hourly wage equation by
Heckman maximum likelihood and the hours of work equation by using a standard
censored regression Tobit model. Separate equations are estimated for the household head,

11
the spouse, and the other family members. 7 For those individuals who do not work, error
terms are drawn from the bivariate normal distribution and a prediction is computed. If this
prediction yields positive hours worked (which is inconsistent with observed behavior), the
error term is sampled again until non-positive hours of work are predicted.

The microsimulation described above suggests that the cost of dropout in terms of foregone
incomes ascends to 7.5% of the GDP each year (18.3% of the total incomes in the
household survey). This number results from computing the total income of the society
under the scenario in which every person with less than complete secondary education had
completed high-school, and comparing it with the actual total income that results from the
ECH in 2014. Moreover, Figure 17 illustrates the distributional effects that the elimination
of dropout would imply. Poverty would fall more than 10 percentage points and inequality
would be reduced almost 4 points, a change that is not far from the reduction in the Gini
index that took place in the period of the largest gain in equality in the recent history of
Uruguay (5.7 points between 2006 and 2014).

6. Exploring the role of aggregate factors on the dropout

decision
The methodology described in the previous section can also be used to explore the role of
other factors that take place at an aggregate level and may also affect the dropout decision.
One of these factors is the returns to education. Section 5 showed that the return to high-
school completion in Uruguay is one of the highest in Latin America. Moreover, Figure 18
and 19 reveal that the return to completing primary education is also high in this country,
while the college wage premium is among the lowest in the region. A higher education
graduate in Uruguay earns a 53 percent higher wage than a high-school graduate of the
same observable characteristics. The premium is relatively low considering that the average
return in the region is almost 70 percent. This disincentive to pursue higher education could
be a driving force behind the high secondary dropout rate in Uruguay.

In order to study the distributional effects of this particular configuration of the returns to
education in Uruguay, microsimulations are performed to estimate the poverty and
inequality that would be present if Uruguay had the returns to education of Colombia,
Brazil, Chile, or the average in Latin America. Figure 20 shows that inequality and poverty
would be higher in any of these cases, which is partially explained by the fact that Uruguay
has the lowest inequality in the returns to education in the region (Figure 21). Therefore,
any policy designed to increase the returns to higher education as a mechanism to incentive
the completion of high-school should be aware of the adverse distributional effects that
such a measure could have.

7
The estimation results of each equation are available upon request.

12
Finally, unemployment is another aggregate factor that may explain school dropout and
deserves to be mentioned. While there are many channels though which unemployment
may affect the dropout rate, the opportunity cost channel is probably one of the most
important. Certainly, when unemployment rates are very high and it is very difficult to find
a job, the opportunity cost of continuing secondary education is very low, and therefore
dropout rates should be lower. In contrast, if unemployment rates are low, the probability of
finding a job for a secondary student are higher, and therefore dropout rates should be
higher, holding all else constant.

Figure 22 shows the unemployment and secondary dropout series in Uruguay from 1989 to
2014. Four periods can be defined. From 1989 to 1998 (period 1) and from 2011 to 2014
(period 4), unemployment remained relatively stable. From 1998 to 2003, unemployment
rose sharply (period 2), and it fell steadily from 2003 to 2011 (period 3). In periods 1 and 4,
in which unemployment remained relatively stable, secondary dropout rates did not show
any clear trend. In contrast, in periods 2 and 3 in which unemployment rose and fell
sharply, secondary dropout moved in the opposite direction, falling when unemployment
increased and rising when unemployment declined. Although this is consistent with the
hypothesis described in the previous paragraph, there are many other factors at play in each
moment that may be driving the trends. Thus, this piece of evidence should not be used to
draw any definite conclusion regarding the effect of this aggregate factor on the secondary
dropout rates.

7. Conclusions and final remarks

Despite some improvements are evident in a long-term analysis, secondary dropout rates in
Uruguay are still among the highest in the region. This paper was aimed at contributing to
the understanding of who drops out in this country in order to identify especially “at-risk”
groups in the population. To that end, a quantitative profile of individual and household
characteristics associated with dropout was estimated, and compared across time and
countries. Moreover, the consequences of school dropout for the individual and the society
as a whole were also analyzed, and the role other aggregate factors at play were briefly
explored.

The results in this paper suggest that youths who are male, older, living in rural areas,
without both biological parents at home and with many siblings, without access to ICT,
who are not the first-born, and are endowed with lower household income as well as less
educated and more economically active parents are especially “at-risk” groups in Uruguay,
i.e., youths with a higher probability of dropping out secondary school. The gender gap in
dropout rates is the largest in Latin America, and the association between school dropout
and family size is also the strongest in the region. The importance of most of these
characteristics to explain dropout has remained stable in the last 25 years, with the
exception of income (and age) whose relevance has decreased. Parental education can be

13
considered the main factor associated to secondary dropout in Uruguay, a factor that may
be seriously compromising upward social mobility.

The findings have strong implications in terms of the policies that may be applied to reduce
secondary dropout rates. While some of the above mentioned characteristics are very
difficult to modify in the short-run (e.g. family structure, parental education), others are
easier to change. International evidence suggests that scholarships or conditional cash
transfer programs can be effective in removing financial restrictions and reducing dropout,
but the cost of this type of interventions is not negligible. Other interventions exploit
youngsters’ lack of information about the returns to education to increase the incentive to
stay at school. In this sense, information campaigns raising awareness of the high returns to
completing high-school in Uruguay and the low proportion of dropouts who get a job in the
formal sector may be a less costly way of preventing school dropout. In any case, policies
should try to accompany the especially “at-risk” groups that were identified in Uruguay.

A final word of caution is needed before the end of this paper. While this study focused on
the demand of education by using data available in household surveys, the supply side
factors should not be underestimated. In particular, the role of teachers, school
infrastructure and the appealing and relevance of the content that is taught in the classrooms
should be a matter of future research. In the interim, the strong association between parents
and children’ education that was shown in this study is an urgent call to action to avoid that
this intergenerational persistence turns into a vicious circle that is hard to break.

14
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OECD (2010). Improving Health and Social Cohesion through Education. Paris: OECD
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16
Tables
Table 1. Household surveys used from SEDLAC database
Country Name of survey Acronym Years
Argentina Encuesta Permanente de Hogares-Continua EPH-C 2015
Bolivia Encuesta de Hogares - MECOVI EH 2013
Brazil Pesquisa Nacional por Amostra de Domicilios PNAD 2014
Chile Encuesta de Caracterización Socioeconómica Nacional CASEN 2013
Colombia Gran Encuesta Integrada de Hogares GEIH 2014
Costa Rica Encuesta Nacional de Hogares ENAHO 2014
Dominican R. Encuesta Nacional de Fuerza de Trabajo ENFT 2014
Ecuador Encuesta de Empleo, Desempleo y Subempleo ENEMDU 2014
El Salvador Encuesta de Hogares de Propósitos Múltiples EHPM 2013
Guatemala Encuesta Nacional de Condiciones de Vida ENCOVI 2011
Honduras Encuesta de Hogares de Propósitos Múltiples EHPM 2013
Mexico Encuesta Nacional de Ingresos y Gastos de los Hogares ENIGH 2014
Nicaragua Encuesta Nacional de Hogares sobre Medición de Nivel de Vida EMNV 2009
Panama Encuesta de Hogares EH 2014
Paraguay Encuesta Permanente de Hogares EPH 2013
Peru Encuesta Nacional de Hogares ENAHO 2014
Uruguay Encuesta Continua de Hogares ECH 1989-2014
Venezuela Encuesta de Hogares Por Muestreo EHM 2011

Table 2. Linear Probability Model of secondary school dropout in Uruguay. Year

2014. OLS estimates for individuals aged 12-17.
Dependent variable: Model
1 = Student dropped out secondary school (1) (2) (3) (4)
Student's characteristics
Male 0.040*** 0.042*** 0.041*** 0.041***
(0.006) (0.005) (0.005) (0.005)
Age 13 0.008* 0.009* 0.010* 0.010*
(0.005) (0.005) (0.005) (0.005)
Age 14 0.055*** 0.055*** 0.054*** 0.056***
(0.007) (0.007) (0.007) (0.007)
Age 15 0.084*** 0.086*** 0.086*** 0.087***
(0.007) (0.007) (0.007) (0.007)
Age 16 0.161*** 0.163*** 0.161*** 0.157***
(0.009) (0.009) (0.009) (0.009)
Age 17 0.252*** 0.253*** 0.250*** 0.241***
(0.010) (0.010) (0.010) (0.010)
White -0.052*** -0.040*** -0.020* -0.014
(0.012) (0.012) (0.012) (0.012)
Inmigrant -0.023 -0.020 0.014 0.014
(0.026) (0.026) (0.026) (0.025)
Family structure
Lives with both biological parents -0.097*** -0.063*** -0.035**
(0.012) (0.015) (0.014)

17
Lives with one biological parent -0.064*** -0.045*** -0.028**
(0.013) (0.014) (0.013)
One sibling -0.006 -0.000 -0.006
(0.008) (0.008) (0.008)
Two siblings 0.018* 0.011 -0.005
(0.010) (0.009) (0.010)
Three siblings 0.055*** 0.033*** 0.009
(0.013) (0.013) (0.014)
Four siblings 0.126*** 0.081*** 0.042**
(0.016) (0.016) (0.017)
Second-born 0.014** 0.010 0.018**
(0.007) (0.007) (0.007)
Third-born 0.007 0.004 0.016
(0.012) (0.011) (0.011)
Fourth-born or more 0.024 0.021 0.031
(0.021) (0.021) (0.021)
Parents' characteristics
Parents' highest education: complete primary -0.034* -0.021
(0.019) (0.019)
Parents' highest education: incomplete secondary -0.127*** -0.091***
(0.018) (0.018)
Parents' highest education: complete secondary -0.177*** -0.122***
(0.019) (0.019)
Parents' highest education: incomplete tertiary -0.207*** -0.145***
(0.019) (0.019)
Parents' highest education: complete tertiary -0.209*** -0.141***
(0.019) (0.019)
Both parents economically active 0.061*** 0.055***
(0.014) (0.014)
One parent economically active 0.066*** 0.056***
(0.013) (0.013)
Household's socioeconomic characteristics
Household per capita income (2005 PPP) -0.000
(0.000)
Urban area -0.052***
(0.015)
Personal computer at home -0.188***
(0.020)
Internet access at home -0.052***
(0.007)
Internet use at home -0.048***
(0.008)
Constant 0.044*** 0.082*** 0.108*** 0.359***
(0.012) (0.016) (0.021) (0.031)
Observations 12,502 12,502 12,497 12,496
R-squared 0.087 0.110 0.145 0.181
Notes: (1) Robust standard errors in parentheses. (2) Sampling weights used. (3) *** p<0.01, ** p<0.05, *
p<0.1

18
Table 3. Probit model of secondary school dropout in Uruguay. Year 2014.
Individuals aged 12-17.
Dependent variable: Model
1 = Student dropped out secondary school (1) (2) (3) (4)
Student's characteristics
Male 0.035*** 0.035*** 0.028*** 0.029***
(0.005) (0.005) (0.004) (0.004)
Age 13 0.026* 0.026* 0.022* 0.021*
(0.014) (0.014) (0.011) (0.011)
Age 14 0.103*** 0.098*** 0.078*** 0.074***
(0.012) (0.012) (0.009) (0.009)
Age 15 0.131*** 0.127*** 0.103*** 0.097***
(0.011) (0.011) (0.009) (0.009)
Age 16 0.183*** 0.177*** 0.144*** 0.136***
(0.011) (0.010) (0.009) (0.009)
Age 17 0.229*** 0.222*** 0.180*** 0.170***
(0.011) (0.010) (0.009) (0.009)
White -0.038*** -0.028*** -0.009 -0.005
(0.008) (0.008) (0.006) (0.006)
Inmigrant -0.016 -0.010 0.038 0.037
(0.031) (0.030) (0.025) (0.025)
Family structure
Lives with both biological parents -0.076*** -0.040*** -0.023***
(0.009) (0.008) (0.008)
Lives with one biological parent -0.046*** -0.025*** -0.015**
(0.009) (0.008) (0.008)
One sibling -0.008 -0.002 -0.003
(0.008) (0.006) (0.007)
Two siblings 0.014 0.009 -0.001
(0.009) (0.007) (0.007)
Three siblings 0.042*** 0.021** 0.007
(0.010) (0.008) (0.009)
Four siblings 0.083*** 0.040*** 0.017*
(0.010) (0.008) (0.009)
Second-born 0.016** 0.011** 0.014***
(0.006) (0.005) (0.005)
Third-born 0.013 0.010 0.015**
(0.009) (0.007) (0.007)
Fourth-born or more 0.032** 0.025** 0.030***
(0.013) (0.011) (0.010)
Parents' characteristics
Parents' highest education: complete primary -0.013* -0.006
(0.008) (0.007)
Parents' highest education: incomplete secondary -0.062*** -0.040***
(0.008) (0.008)
Parents' highest education: complete secondary -0.108*** -0.069***
(0.011) (0.010)

19
Parents' highest education: incomplete tertiary -0.156*** -0.108***
(0.017) (0.017)
Parents' highest education: complete tertiary -0.203*** -0.145***
(0.014) (0.015)
Both parents economically active 0.033*** 0.029***
(0.008) (0.008)
One parent economically active 0.037*** 0.028***
(0.008) (0.007)
Household's socioeconomic characteristics
Household per capita income (2005 PPP) -0.000**
(0.000)
Urban area -0.028***
(0.007)
Personal computer at home -0.052***
(0.007)
Internet access at home -0.031***
(0.005)
Internet use at home -0.023***
(0.004)
Observations 12,502 12,502 12,497 12,496
Pseudo R-squared 0.128 0.160 0.228 0.264

Notes: (1) Standard errors in parentheses. (2) Sampling weights used. (3) *** p<0.01, ** p<0.05, * p<0.1
(4) Marginal effects evaluated at means.

20
Table 4. Simplified model of secondary school dropout in Uruguay. Years 1989-2014. OLS estimates for individuals aged 12-17
Dependent variable: Year
1 = Student dropped out secondary school 1989 1991 1992 1995 1996 1997 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Male 0.037*** 0.045*** 0.039*** 0.060*** 0.056*** 0.037*** 0.037*** 0.027*** 0.041*** 0.031*** 0.029*** 0.021*** 0.015* 0.036*** 0.036*** 0.032*** 0.039*** 0.046*** 0.041*** 0.038*** 0.039*** 0.036***
(0.012) (0.008) (0.009) (0.009) (0.009) (0.009) (0.010) (0.010) (0.008) (0.008) (0.008) (0.008) (0.008) (0.005) (0.005) (0.006) (0.006) (0.006) (0.006) (0.006) (0.006) (0.005)
Age 0.070*** 0.069*** 0.067*** 0.074*** 0.071*** 0.067*** 0.065*** 0.065*** 0.052*** 0.048*** 0.046*** 0.044*** 0.051*** 0.058*** 0.063*** 0.058*** 0.053*** 0.059*** 0.054*** 0.051*** 0.050*** 0.049***
(0.004) (0.002) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) (0.001) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.002)
Single-parent family 0.009 0.010 0.028** 0.052*** 0.017 0.034*** 0.036*** 0.040*** 0.019 0.017 -0.003 0.031*** 0.021* 0.008 0.020*** 0.016** 0.006 0.012 0.003 0.002 0.013* 0.009
(0.018) (0.013) (0.014) (0.014) (0.013) (0.012) (0.014) (0.013) (0.012) (0.011) (0.010) (0.011) (0.011) (0.006) (0.007) (0.007) (0.007) (0.008) (0.007) (0.007) (0.007) (0.007)
Number of siblings 0.016*** 0.014*** 0.022*** 0.019*** 0.024*** 0.024*** 0.017*** 0.023*** 0.012*** 0.015*** 0.013*** 0.013*** 0.017*** 0.017*** 0.013*** 0.018*** 0.013*** 0.013*** 0.010*** 0.008*** 0.012*** 0.013***
(0.004) (0.003) (0.003) (0.003) (0.004) (0.004) (0.004) (0.004) (0.003) (0.004) (0.003) (0.003) (0.004) (0.002) (0.002) (0.002) (0.003) (0.003) (0.003) (0.003) (0.003) (0.003)
First-born child -0.034*** -0.017* -0.025** -0.019* -0.015 -0.010 -0.003 -0.020* -0.018** -0.014 -0.025*** -0.002 0.011 -0.009* -0.012** -0.006 -0.009 -0.020*** -0.021*** -0.014** -0.017*** -0.017***
(0.013) (0.009) (0.010) (0.010) (0.010) (0.010) (0.011) (0.011) (0.009) (0.009) (0.009) (0.009) (0.009) (0.005) (0.006) (0.006) (0.007) (0.007) (0.007) (0.007) (0.006) (0.006)
Highest parental educational level (standarized) -0.053*** -0.061*** -0.061*** -0.062*** -0.072*** -0.072*** -0.058*** -0.065*** -0.065*** -0.061*** -0.058*** -0.049*** -0.051*** -0.059*** -0.070*** -0.055*** -0.066*** -0.056*** -0.054*** -0.045*** -0.055*** -0.062***
(0.006) (0.004) (0.004) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.003) (0.003) (0.003) (0.004) (0.004) (0.004) (0.004) (0.003) (0.003)
No parent economically active -0.047** -0.024 0.013 -0.034* -0.030* -0.036** -0.047** -0.021 -0.044** -0.037** -0.028* -0.015 -0.021 -0.025*** -0.020* -0.002 -0.012 -0.030** 0.004 0.004 -0.002 -0.025**
(0.023) (0.017) (0.019) (0.018) (0.017) (0.016) (0.019) (0.020) (0.017) (0.017) (0.016) (0.017) (0.017) (0.009) (0.011) (0.012) (0.014) (0.013) (0.014) (0.014) (0.013) (0.012)
Household per capita income (standarized) -0.037*** -0.023*** -0.037*** -0.050*** -0.045*** -0.039*** -0.053*** -0.035*** -0.018*** -0.019*** -0.019*** -0.023*** -0.028*** -0.016*** -0.018*** -0.026*** -0.013*** -0.029*** -0.025*** -0.039*** -0.023*** -0.010***
(0.012) (0.008) (0.005) (0.006) (0.006) (0.006) (0.007) (0.006) (0.005) (0.005) (0.004) (0.005) (0.006) (0.005) (0.006) (0.003) (0.004) (0.005) (0.005) (0.006) (0.005) (0.004)
Constant -0.886*** -0.898*** -0.887*** -0.959*** -0.934*** -0.873*** -0.840*** -0.852*** -0.677*** -0.630*** -0.596*** -0.584*** -0.677*** -0.749*** -0.827*** -0.771*** -0.696*** -0.780*** -0.706*** -0.668*** -0.658*** -0.645***
(0.048) (0.035) (0.039) (0.037) (0.037) (0.036) (0.039) (0.040) (0.036) (0.036) (0.037) (0.037) (0.038) (0.020) (0.023) (0.024) (0.026) (0.027) (0.026) (0.027) (0.024) (0.024)
Observations 3,216 6,402 5,089 6,121 6,076 5,854 5,278 5,309 5,542 5,357 5,312 5,279 5,174 22,366 13,549 13,660 12,416 12,762 12,214 11,286 11,960 11,930
R-squared 0.154 0.154 0.167 0.171 0.166 0.168 0.149 0.165 0.135 0.130 0.114 0.106 0.124 0.143 0.154 0.138 0.127 0.137 0.125 0.116 0.121 0.125

Notes: (1) Robust standard errors in parentheses. (2) Sampling weights used. (3) *** p<0.01, ** p<0.05, * p<0.1 (4) Sample restricted to urban areas to take into
account the change in the sample coverage in 2006.
Table 5. Simplified model of secondary school dropout in LAC countries. Circa 2014. OLS estimates for individuals aged 12-17
Dependent variable: Country
1 = Student dropped out secondary school arg bol bra chl col cri dom ecu gtm hnd mex nic pan per pry slv ury ven
Male 0.013** -0.017** -0.003** -0.001 0.010 -0.000 -0.014*** -0.005 -0.002 -0.018 -0.010 -0.007 0.018** 0.004 -0.009 -0.005 0.040*** 0.018***
(0.006) (0.008) (0.002) (0.003) (0.007) (0.009) (0.005) (0.007) (0.009) (0.012) (0.009) (0.013) (0.008) (0.005) (0.012) (0.004) (0.005) (0.004)
Age 0.026*** 0.023*** 0.016*** 0.011*** 0.033*** 0.029*** 0.010*** 0.033*** 0.052*** 0.061*** 0.061*** 0.052*** 0.038*** 0.019*** 0.042*** 0.021*** 0.051*** 0.029***
(0.002) (0.003) (0.001) (0.001) (0.002) (0.003) (0.002) (0.002) (0.003) (0.004) (0.003) (0.004) (0.003) (0.002) (0.004) (0.001) (0.002) (0.001)
Single-parent family 0.020** -0.004 0.003 0.007* -0.004 -0.019* -0.004 -0.012 -0.027** -0.029* -0.001 -0.024 -0.003 -0.010* -0.006 0.001 0.004 -0.000
(0.009) (0.011) (0.002) (0.004) (0.008) (0.010) (0.006) (0.009) (0.011) (0.015) (0.012) (0.015) (0.010) (0.006) (0.015) (0.006) (0.007) (0.005)
Number of siblings 0.002 -0.007** -0.004*** -0.001 -0.006 -0.007 -0.005** -0.007*** 0.006** 0.008** 0.010*** -0.005 0.005* 0.003 -0.007 -0.003* 0.014*** -0.001
(0.003) (0.003) (0.001) (0.002) (0.004) (0.004) (0.002) (0.002) (0.002) (0.004) (0.004) (0.004) (0.003) (0.002) (0.005) (0.001) (0.003) (0.002)
First-born child -0.011 -0.014 -0.018*** -0.002 -0.036*** -0.027*** -0.010 -0.013* -0.008 -0.007 -0.013 -0.024 -0.014 -0.008 -0.039*** -0.004 -0.018*** -0.019***
(0.007) (0.009) (0.002) (0.003) (0.008) (0.009) (0.006) (0.008) (0.010) (0.014) (0.009) (0.015) (0.009) (0.005) (0.014) (0.005) (0.006) (0.004)
Highest parental educational level (standarized) -0.027*** -0.032*** -0.005*** -0.010*** -0.038*** -0.034*** -0.009*** -0.040*** -0.040*** -0.108*** -0.071*** -0.032*** -0.040*** -0.025*** -0.044*** -0.012*** -0.066*** -0.034***
(0.004) (0.005) (0.001) (0.002) (0.004) (0.006) (0.003) (0.004) (0.004) (0.006) (0.005) (0.007) (0.004) (0.003) (0.006) (0.001) (0.003) (0.002)
No parent economically active -0.015 -0.005 -0.010*** 0.001 -0.048*** -0.024* -0.016** -0.015 -0.001 -0.050*** -0.033** -0.022 -0.030** 0.007 -0.030 -0.016** -0.029** -0.025***
(0.012) (0.022) (0.003) (0.008) (0.013) (0.014) (0.007) (0.017) (0.017) (0.019) (0.017) (0.021) (0.014) (0.014) (0.027) (0.007) (0.012) (0.007)
Household per capita income (standarized) -0.001 -0.013*** -0.003*** -0.001 -0.009** -0.007 0.002 -0.015*** -0.003 -0.032*** -0.008 -0.001 -0.008*** -0.003 -0.025*** -0.001 -0.009** -0.004**
(0.005) (0.004) (0.001) (0.001) (0.004) (0.007) (0.003) (0.004) (0.004) (0.011) (0.006) (0.010) (0.003) (0.002) (0.008) (0.002) (0.004) (0.002)
Constant -0.333*** -0.248*** -0.194*** -0.145*** -0.378*** -0.327*** -0.108*** -0.389*** -0.628*** -0.615*** -0.749*** -0.611*** -0.483*** -0.236*** -0.492*** -0.264*** -0.667*** -0.349***
(0.028) (0.038) (0.008) (0.015) (0.030) (0.034) (0.020) (0.029) (0.035) (0.051) (0.037) (0.051) (0.036) (0.021) (0.049) (0.019) (0.024) (0.017)
Observations 11,928 4,528 37,022 20,264 21,363 4,175 3,641 13,778 10,071 5,108 8,755 4,255 5,337 10,693 2,683 12,126 12,496 18,800
R-squared 0.066 0.049 0.036 0.028 0.061 0.062 0.032 0.067 0.084 0.105 0.130 0.080 0.086 0.043 0.095 0.048 0.130 0.058
Notes: (1) Robust standard errors in parentheses. (2) Sampling weights used. (3) *** p<0.01, ** p<0.05, * p<0.1
Figures
Figure 1. Enrollment rate by age in Uruguay. Year 2014.
Enrollment rate
98% 100% 100% 100% 100% 99% 98% 97%
100% 92% 89%
90% 81%
80% 71%
70%
60%
50%
40%
30%
20%
10%
0%
6 7 8 9 10 11 12 13 14 15 16 17
Age
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Enrollment rate by age computed as the percentage of individuals of that age who attend school

Figure 2. Distribution of secondary school dropout by grade for different cohorts.

Year 2014.

(a) Cohort aged 20-29 (b) Cohort aged 60-69

25% 60%
22%
21% 49%
50%
20%
17%
15% 40%
15% 13%
11% 30%
10%
20% 15% 14%
11%
5% 6%
10%
5%
0% 0%
7th 8th 9th 10th 11th 12th 7th 8th 9th 10th 11th 12th
Grade Grade

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Notes: 1) Secondary school dropout defined as anyone who did not complete secondary education and whose
last completed year of education is the last grade of primary education or higher. 2) Dropouts in any grade
include those students who did not enroll in the corresponding grade, since it is not possible to differentiate
between those who enrolled and did not complete the grade and those who did not even enroll in it.
Figure 3. Secondary school dropout rate in Uruguay, 1989-2014.
25

19.5
20
16.9
14.0
15
15.6

10
10.3 11.1

0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: The ECH experienced an important coverage change in 2006, when it was expanded to cover rural
areas. To take this change into account, the values before 2006 were obtained multiplying the values for urban
areas by a splice coefficient equal to the ratio of secondary school dropout in rural and urban areas in 2006 to
the secondary dropout rate in urban areas in that year.

Figure 4. Secondary school dropout rate in Latin American countries.

Secondary school dropout rate

30%

25%

20%

15%

11.1%
10%

5%

0%
hnd mex gtm nic ury col pry pan ecu ven cri bol arg per slv bra chl dom

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Dropout rate defined as the percentage of the population in age of attending secondary school (aged 12-
17) who completed primary education, did not complete secondary education, and do not attend school.

23
Figure 5. Secondary school dropout rate in Uruguay by student's characteristics. Year
2014
By gender By age
30 30 26.8
25 25
20 20 17.7
15 13.0 15
9.1 10.0
10 10 7.1
5 5 1.5 2.3
0 0
Female Male 12 13 14 15 16 17
By country of origin By race
30 30
25 25
20 20 17.3
15 11.1 15 12.2
10.7
10 7.6 10
5 5
0 0
Native Inmigrant White Black Indigenous
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Dropout rate defined as the percentage of the population in age of attending secondary school (aged 12-
17) who completed primary education, did not complete secondary education, and do not attend school.

Figure 6. Secondary school dropout rate in Uruguay by family structure. Year 2014
By number of biological By number of siblings By order of birth
parents at home 29.8
30 30 30
24.4
25 25 25

20 17.3 20 18.5 20 17.5

15 15 13.7 15
12.9 11.8
10.1 9.5 10.5
10 8.5 10 8.8 10
7.5
5 5 5

0 0 0
Both One None 0 1 2 3 4 5 6 1st 2nd 3rd 4th or
more
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Dropout rate defined as the percentage of the population in age of attending secondary school (aged 12-
17) who completed primary education, did not complete secondary education, and do not attend school.

24
Figure 7. Secondary school dropout rate in Uruguay by parents' characteristics. Year
2014
By number of parents
By parents' highest level of education
economically active
30 30
24.1
25 25
20.8
20 20
13.8 13.1 15
15
10.3
8.2 10
10
4.4
5 5
1.8 0.5
0 0
Incomplete

Complete

Incomplete

Incomplete

Complete
secondary
Complete
Both One None

secondary
primary

tertiary
primary

tertiary
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Dropout rate defined as the percentage of the population in age of attending secondary school (aged 12-
17) who completed primary education, did not complete secondary education, and do not attend school.

Figure 8. Secondary school dropout rate in Uruguay by household's socioeconomic

characteristics. Year 2014
By quintile of household per capita income By area of residence
30 30

25 25
19.0
20 20
16.7
15 15
11.7 10.6
8.4
10 10
4.7
5 5
1.3
0 0
1 2 3 4 5 Urban Rural

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Dropout rate defined as the percentage of the population in age of attending secondary school (aged 12-
17) who completed primary education, did not complete secondary education, and do not attend school.

25
Figure 9. Secondary school dropout rate in Uruguay by household’s educational
resources. Year 2014
By pc availabily By internet access at home By internet use at home

45 41.3 30 30
40
25 25
35
19.9 18.5
30 20 20

25 15 15
20 8.4
10 10
15 6.0
9.5 5
10 5
5 0 0
0 With internet Without Uses Does not
With pc Without pc access internet internet use internet
access
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Dropout rate defined as the percentage of the population in age of attending secondary school (aged 12-
17) who completed primary education, did not complete secondary education, and do not attend school.

26
Figure 10. Trends in the association between individual and household characteristics
and the secondary dropout rate in Uruguay, 1989-2014. Marginal effects.
(a) Male (b) Age
0.10 0.10
0.08 0.08
0.06 0.06
0.04 0.04
0.02 0.02
0.00 0.00
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013

1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
-0.02 -0.02
-0.04 -0.04
-0.06 -0.06
-0.08 -0.08
-0.10 -0.10

(c) Single-parent family (d) Number of siblings

0.10 0.10
0.08 0.08
0.06 0.06
0.04 0.04
0.02 0.02
0.00 0.00
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013

1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
-0.02 -0.02
-0.04 -0.04
-0.06 -0.06
-0.08 -0.08
-0.10 -0.10

27
 (e) First-born (f) Highest parental education
0.10 0.10
0.08 0.08
0.06 0.06
0.04 0.04
0.02 0.02
0.00 0.00
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013

1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
-0.02 -0.02
-0.04 -0.04
-0.06 -0.06
-0.08 -0.08
-0.10 -0.10

(g) No parent economically active (h) Household per capita income

0.10 0.10
0.08 0.08
0.06 0.06
0.04 0.04
0.02 0.02
0.00 0.00
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013

1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
-0.02 -0.02
-0.04 -0.04
-0.06 -0.06
-0.08 -0.08
-0.10 -0.10

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: The solid line represents the coefficients associated to the corresponding variable in the simplified model
presented in Table 4. The dashed lines show the 95% confidence interval.

28
Figure 11. Cross-country comparison of the association between individual and
household characteristics and the secondary dropout rate. LAC countries circa 2014.

Change in the probability of dropping out associated to being male

0.05
0.04
0.03
0.02
0.01
0.00
-0.01
-0.02
-0.03
ury ven pan arg col per cri chl gtm bra slv ecu nic pry mex dom bol hnd

Change in the probability of dropping out associated to an additional year

0.07
of age
0.06
0.05
0.04
0.03
0.02
0.01
0.00
hnd mex gtm nic ury pry pan col ecu cri ven arg bol slv per bra chl dom

Change in the probability of dropping out associated to being a member of

0.03
a single-parent family
0.02
0.01
0.00
-0.01
-0.02
-0.03
-0.04
arg chl ury bra slv ven mex pan dom col bol pry per ecu cri nic gtm hnd

29
 Change in the probability of dropping out associated to having an additional
0.015
sibling
0.010

0.005

0.000

-0.005

-0.010
ury mex hnd gtm pan per arg ven chl slv bra nic dom col cri ecu pry bol

Change in the probability of dropping out associated to be a first-born child

0.00

-0.01

-0.02

-0.03

-0.04

-0.05
chl slv hnd per gtm dom arg ecu mex bol pan bra ury ven nic cri col pry

Change in the probability of dropping out associated to one standard

deviation in the highest parental education
0.00
-0.02
-0.04
-0.06
-0.08
-0.10
-0.12
bra dom chl slv per arg nic bol cri ven col pan gtm ecu pry ury mex hnd

30
 Change in the probability of dropping out associated to having no parent
0.01 economically active
0.00
-0.01
-0.02
-0.03
-0.04
-0.05
-0.06
per chl gtm bol bra arg ecu slv dom nic cri ven ury pan pry mex col hnd

Change in the probability of dropping out associated to one standard

0.01 deviation in the household per capita income

0.00

-0.01

-0.02

-0.03

-0.04
dom arg chl nic slv per gtm bra ven cri mex pan ury col bol ecu pry hnd

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Bars represent the coefficients associated to the corresponding variable in the simplified model
presented in Table 5.

Figure 12. Where do secondary dropouts go when they dropout?

(a) Distribution of secondary dropouts (b) Distribution of secondary dropouts
(aged 12-17) (aged 16-17)
100% 100%
90% 90%
80% Not studying, Not studying,
80%
not working, not working,
70% 70% 54.3%
62.4% not looking for not looking for
60% a job 60% a job
Unemployed Unemployed
50% 50%
40% 40% 13.3%
30% 10.6% 30%
Working in the Working in the
20% informal sector 20% informal sector
25.2% 29.9%
10% 10%
0% 1.8% 0% 2.5%

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Secondary dropouts = individuals in age of attending secondary school (aged 12-17) who completed
primary education, did not complete secondary education, and do not attend school.

31
Figure 13. Unemployment and informality rate in Uruguay by high-school
completion. Year 2014
Unemployment rate Informality rate

30% 30%
27%

25% 25%

20% 20%

15% 15%
13%

10% 8% 10%
5%
5% 5%

0% 0%
Incomplete Complete Incomplete Complete
secondary secondary secondary secondary

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)

Figure 14. Return to high-school completion in LAC countries circa 2014.

Return to high-school completion

40%

35%

30% 28.1%

25%

20%

15%

10%

5%

0%
gtm mex ury hnd pan pry cri bra chl col arg ecu bol nic dom slv ven per

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Bars show the coefficient associated to complete secondary education less the coefficient of incomplete
secondary education in a Mincer equation estimated by Heckman full maximum likelihood, where the
dependent variable is the logarithm of hourly wage of individuals aged 25–55. The explanatory variables are: a
male dummy, educational dummies, age, age squared, regional dummies, an employee indicator, and 6
sectoral binary variables. The selection equation includes the same variables plus number of children, number
of children interacted with the gender dummy, a marriage indicator and a school attendance binary variable.

32
Figure 15. Return to high-school completion in formal vs. informal labor markets.
LAC countries circa 2014.
Return to high-school completion in formal labor markets
45%
40%
35%
30%
23.6%
25%
20%
15%
10%
5%
0%
gtm mex bol cri ury bra chl arg ecu col ven pry per hnd

Return to high-school completion in informal labor markets

30%

25% 22.5%

20%

15%

10%

5%

0%
hnd ury mex pry gtm bra chl col ecu cri per bol ven arg

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Notes: Bars show the coefficient associated to complete secondary education less the coefficient of incomplete
secondary education in a Mincer equation estimated by Heckman full maximum likelihood, where the
dependent variable is the logarithm of hourly wage of individuals aged 25–55 who work in the formal and
informal sector, respectively. A legal definition of informality is used (i.e. an informal worker is someone without
right to pension in her job). The explanatory variables are: a male dummy, educational dummies, age, age
squared, regional dummies, an employee indicator, and 6 sectoral binary variables. The selection equation
includes the same variables plus number of children, number of children interacted with the gender dummy, a
marriage indicator and a school attendance binary variable.

33
Figure 16. Return to high-school completion for quantiles 0.1 and 0.9 in LAC circa
2014.
Return to high-school completion for quantile 0.1
45%
40%
35%
30%
25% 22%
20%
15%
10%
5%
0%
gtm pan mex ury nic cri hnd arg col bra chl bol dom per ecu ven pry slv

Return to high-school completion for quantile 0.9

50%
45%
40%
35%
30% 27%
25%
20%
15%
10%
5%
0%
gtm cri mex ury hnd bra chl dom pan col ecu arg nic bol ven per pry slv
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Bars show the coefficient associated to complete secondary education less the coefficient of incomplete
secondary education in a quantile regression estimated at quantile 0.1 and 0.9, respectively, where the
dependent variable is the logarithm of hourly wage of individuals aged 25–55. The explanatory variables are: a
male dummy, educational dummies, age, age squared, regional dummies, an employee indicator, and 6
sectoral binary variables.

34
Figure 17. Microsimulations: inequality and poverty resulting from the elimination of
school dropout.
Gini before and after the elimination of Poverty before and after the elimination
dropout of dropout
45 40.9 45
40 37.2 40
35 35
30 30 25.7
25 25
20 20
15.2
15 15
10 10
5 5
0 0
Actual (observed) After elimination of Actual (observed) After elimination of
school dropout school dropout
Source: Own calculations based on SEDLAC (CEDLAS and the World Bank).
Note: FGT(0) computed using the official moderate poverty line.

Figure 18. Return to primary education in LAC countries, circa 2014.

Return to primary education

30%

25%
22.0%

20%

15%

10%

5%

0%
pan ury hnd gtm bra bol col ecu arg mex cri nic per chl slv ven dom pry

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Bars show the coefficient associated to complete primary education in a Mincer equation estimated by
Heckman full maximum likelihood, where the omitted educational dummy is the incomplete primary indicator
and the dependent variable is the logarithm of hourly wage of individuals aged 25–55. The explanatory
variables are: a male dummy, educational dummies, age, age squared, regional dummies, an employee
indicator, and 6 sectoral binary variables. The selection equation includes the same variables plus number of
children, number of children interacted with the gender dummy, a marriage indicator and a school attendance
binary variable.

35
Figure 19. Return to higher education in LAC countries, circa 2014.
Return to higher education

120%

100%

80%

60%
53.0%

40%

20%

0%
cri col bra pry gtm slv chl dom pan nic hnd mex bol ury ecu per arg ven

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Bars show the coefficient associated to complete tertiary education less the coefficient of complete
secondary education in a Mincer equation estimated by Heckman full maximum likelihood, where the
dependent variable is the logarithm of hourly wage of individuals aged 25–55. The explanatory variables are: a
male dummy, educational dummies, age, age squared, regional dummies, an employee indicator, and 6
sectoral binary variables. The selection equation includes the same variables plus number of children, number
of children interacted with the gender dummy, a marriage indicator and a school attendance binary variable.

36
Figure 20. Microsimulations: inequality and poverty resulting from different
scenarios of changes in the returns to education
Gini before and after changing the returns to education

45.0
44.1
43.7 43.8
44.0
43.0
42.0 41.4
40.9
41.0
40.0
39.0
Actual If Uruguay had If Uruguay had If Uruguay had If Uruguay had
(observed) the returns to the returns to the returns to the returns to
education of education of education of education of LAC
Colombia Brazil Chile

Poverty before and after changing the returns to education

35.0 33.1
28.8 27.8 29.5
30.0 25.7
25.0
20.0
15.0
10.0
5.0
0.0
Actual If Uruguay had If Uruguay had If Uruguay had If Uruguay had
(observed) the returns to the returns to the returns to the returns to
education of education of education of education of LAC
Colombia Brazil Chile

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank).
Note: FGT(0) computed using the official moderate poverty line.

37
 Figure 21. Inequality in the returns to education in LAC countries.
Gini of the returns to education

45
43
41
39
37
35
33
31
29
27
25
pry slv dom chl cri bra nic col ven mex gtm bol per ecu arg hnd pan ury

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: Bars show the Gini index of the coefficients of educational dummies (complete primary, incomplete
secondary, complete secondary, incomplete higher education, complete higher education) in a Mincer equation
estimated by Heckman full maximum likelihood, where the dependent variable is the logarithm of hourly wage
of individuals aged 25–55. The explanatory variables are: a male dummy, educational dummies, age, age
squared, regional dummies, an employee indicator, and 6 sectoral binary variables. The selection equation
includes the same variables plus number of children, number of children interacted with the gender dummy, a
marriage indicator and a school attendance binary variable.

Figure 22. Unemployment and secondary school dropout rate in Uruguay, 1989-2014.
25

19.5
20
16.9
16.2
14.0
15
15.6 11.3 Secondary dropout
10 11.1 Unemployment
10.3
9.6
7.6 6.5
5
Period 1 Period 2 Period 3 Period 4
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

Source: Own calculations based on SEDLAC (CEDLAS and the World Bank)
Note: The ECH experienced an important coverage change in 2006, when it was expanded to cover rural
areas. To take this change into account, the values before 2006 were obtained multiplying the values for urban
areas by a splice coefficient equal to the ratio of the value in rural and urban areas in 2006 to the value in
urban areas in that year.

38

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