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2. Literature Review
There is a large body of UK empirical research that examines the factors that
influence the decision to participate in post-compulsory education between the
ages of 16-18. Most of these studies, often carried out by educationalists,
psychologists and economists, using different data and methodologies, find some
agreement on the factors that influence this decision (Appendix A1 provides the list
of references to the studies reported in this section. Appendix A2 provides a
summary of data and methodologies used in selected studies reviewed below). It
is important to note that there is almost universal agreement in the studies
reviewed here, inter alia, that educational attainment at 16, measured by either O
level or GCSE grades, provide an important indicator of an individual’s academic
skills and aptitude for post-compulsory education and is found to be a significant
determinant of participation rates. For ease of exposition we review the literature
under four headings that convey the general influences on the decision to
participate in post-compulsory education commonly found. These are: expected
future earnings, family background characteristics, school effects, and the effect of
government policy changes.
2.1 Expected Future Earnings
The theory of human capital is often used as a framework of analysis in many
empirical studies (see Becker, 1993). Post-compulsory education is assumed to
be an investment good and the returns to such investment, as measured by the
future or lifetime discounted earnings stream associated with post-compulsory
qualifications, is assumed, a priori, to be an important determinant of participation
in education beyond the school leaving age. Researchers using labour market
information from a variety of data sources (see Appendix A2), have constructed
variables that proxy pupils’ expected lifetime earnings streams. These include: the
future discounted earnings associated with graduate study; the future discounted
earnings associated with different occupations; and the future discounted earnings
received by different ethnic groups (see, for example, Leslie and Drinkwater, 1991;
Andrews and Bradley, 1997; Rice, 1999). The results from this literature support the
view that a pupil’s expected future earnings are significant in determining the
decision to participate in post-compulsory education. Against this, studies using
time series data over various periods since the 1950s, have suggested that higher
levels of present and future youth and adult unemployment are associated with
greater uncertainty regarding future earning streams and thereby discourage
participation (see, for example, Pissarides, 1981; Whitfield and Wilson 1991; Rice,
1999; McVicar and Rice, 2001; Clark, 2002). However, Micklewright et al (1988)
found no evidence of an association between participation rates and
unemployment in the period 1974-78.
2.2 Family Background Characteristics
A consistent finding in cross-sectional studies is that the parental and socioeconomic
background of a student has an important effect on the probability of
participating in post-compulsory education. Such influences can be transmitted
through parents’ ability to finance, encourage, and support their children in further
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