School Quality, Achievement Bias, and Dropout Behavior in Egypt. Living Standards Measurement Study (LSMS) Working Paper No. 107.

This paper demonstrates the analytical importance of employing output-based measures of school quality. The empirical analysis employs data collected in a longitudinal survey of primary school students in Egypt during 2 academic years, 1978-79 and 1979-80. School quality and grade completion are shown to be directly linked, leading to very different perspectives on educational policy in developing countries. Unique panel data on primary school age children in Egypt permit estimation of behavioral school dropout models. Students perceive differences in school quality, measured as expected achievement improvements in a given school, and act on it. Specifically, holding constant the students own ability, achievement and earnings prospects, a student is much less likely to remain in school if attending a low quality school rather than a higher quality school. This individually rational behavior suggests that arguments about a trade-off between quality and access to schools may mis-state the real issue and lead to public investment in too little quality. Further, because of this behavioral linkage, there is an achievement bias such that common estimates of rates of return to years of school will be overstated. The paper includes: (1) Foreword; (2) Abstract; (3) Acknowledgments; (4) Introduction; (5) Egyptian Schooling; (6) Overview of Model--School Quality, and Opportunities Outside School; (7) Estimation Samples; (8) Basic Empirical Results--School Quality, Earnings Opportunities, Probability of Market Work, and School Dropout Behavior; (9) Conclusions; and (10) 32 references. (Author/EH)