samlet årgang - Økonomisk Institut - Københavns Universitet

THE EFFECT OF LABOUR MARKET CONDITIONS ON HIGHER EDUCATION COMPLETION 85
allows flexible functional forms for both the baseline hazard and the distribution of the
unobserved heterogeneity.
The rest of the paper is organized as follows: Section II gives an overview of the
educational system in Denmark, Section III lays out a simple theoretical framework
for the subsequent reduced form empirical model, Section IV specifies the duration
model which is the basis for the analysis, Section V discusses the data, Section VI presents
sample descriptive statistics and Section VII the results of estimation. Section
VIII concludes.
II. Higher Education in Denmark
Figure 1 gives an overview of the Danish educational system. In the Danish system,
children enter school at age 7 and must take 7 years of compulsory primary schooling
plus 2 years of compulsory lower secondary schooling. Following the basic 9 years of
compulsory schooling, the routes to higher education are either to directly proceed to a
3-year high school (gymnasium) program or to take an extra (voluntary) 10 th year of
lower secondary school before going on to the 3-year high school. A 2-year high
school equivalent degree (HF) requires the 10 th grade of secondary school. Vocationbased
high school degrees such as in business management or technical fields require
one year of basic training following compulsory school. Following high school,
bachelor programs are typically 3 or in some cases, 2 years in length. Masters programs
are 2 years and the Ph.D. is a 3-year program. Figure 1 also gives corresponding
ISCED levels. 4
III. Theoretical Considerations
Individuals (students) take into account future earnings and unemployment risk when
deciding how many years they take to complete a given higher educational program, that
is, whether or not to extend the time taken to complete the educational program. We
ignore the issue of dropouts, i.e. persons who begin an educational program but do not
complete it.
Let V be the value to an individual say high school graduate, of completing a higher
educational program in t years.
V(t) = V(Y, , UIB,C,wH,G,Z,p,U) (3.1)
The (net present) value depends on the future earnings Y after completion, , the
probability of employment and UIB, the unemployment benefit. It also depends on
costs of completion (C), both out-of-pocket costs plus forgone labour market earnings
4. ISCED = International Standard Classification of Education.