Academic Performance and College Dropout

This paper estimates a dynamic learning model of the college dropout decision, taking advantage of unique expectations data to greatly reduce our reliance on assumptions that would otherwise be necessary for identification.

Forty-five percent of the dropout that occurs in the first two years of college can be attributed to what students learn about their about academic performance, but that this type of learning becomes a less important determinant of dropout after the midpoint of college We use our model to quantify the importance of the possible avenues through which poor grade performance could influence dropout. Students who perform poorly tend to learn that staying in school is not worthwhile, not that they fail out or learn that they are more likely (than they previously believed) to fail out in the future. Poor performance both substantially decreases the enjoyability of school and substantially influences beliefs about post-college earnings.