Skip to main content
SpringerLink
Log in

Saved by the bell? The effects of compulsory schooling laws on self-employment and earnings in Australia

  • Regular Article
  • Published:
Journal of Evolutionary Economics Aims and scope Submit manuscript

Abstract

Extending the research on secondary education and entrepreneurship, we ask whether compulsory schooling laws influence selection into and earnings from self-employment. We exploit the increase in the minimum school-leaving age from 14 to 15 in the mid-1960s in Victoria and South Australia. The findings show that for both males and females, likelihood and income from self-employment declined. The additional year of schooling did not influence self-employment through cognitive abilities, locus of control, well-being outcomes, or Big-Five personality dimensions.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6

Similar content being viewed by others

Data availability

The data used in this study are publicly available.

Notes

  1. The details are based on the following sources:

    1. 1.

      Australian Government Department of Education, Skills and Employment. (2021). Compulsory school age. https://www.education.gov.au/compulsory-school-age

    2. 2.

      Department of Education and Children's Services (South Australia). (1963). Education Act, 1963. https://www.legislation.sa.gov.au/LZ/C/A/EDUCATION%20ACT%201963/CURRENT/1963.70.AUTH.PDF

    3. 3.

      Parliament of Victoria. (1964). Education Act 1964. https://www.legislation.vic.gov.au/in-force/acts/education-act-1964/068

    4. 4.

      Department of Education and Training (Victoria). (2014). History of Victorian government schools. https://www.education.vic.gov.au/about/department/Pages/historygovschools.aspx

  2. The younger individuals are not included in the treated group as they would not have experienced the treatment. The age distribution is presented in the histogram below

References

  • Amit R, Muller E, Cockburn I (1995) Opportunity costs and entrepreneurial activity. J Bus Ventur 10(2):95–106

    Article  Google Scholar 

  • Angrist JD, Keueger AB (1991) Does compulsory school attendance affect schooling and earnings? Q J Econ 106(4):979–1014

  • Angrist N, Djankov S, Goldberg PK, Patrinos HA (2021) Measuring human capital using global learning data. Nature 592(7854):403–408

    Article  Google Scholar 

  • Ashenfelter O, Harmon C, Oosterbeek H (1999) A review of estimates of the schooling/earnings relationship, with tests for publication bias. Labour Econ 6(4):453–470

  • Audretsch DB, Thurik R (2001) Linking entrepreneurship to growth. No. 2001/2. OECD Publishing

  • Avendano M, De Coulon A, Nafilyan V (2020) Does longer compulsory schooling affect mental health? Evidence from a British reform. J Public Econ 183:104137

    Article  Google Scholar 

  • Balduzzi L, Lazzari A, Van Laere K, Boudry C, Rezek M, Mlinar M, McKinnon E (2019) Literature review on transitions across early childhood and compulsory school settings in Europe

  • Becker GS (1994) Human Capital. University of Chicago Press Economics Books

  • Becker GS (1962) Investment in human capital: A theoretical analysis. Journal of Political Economy 70(5 Part 2):9–49

    Article  Google Scholar 

  • Bhuller M, Mogstad M, Salvanes KG (2011). Life-cycle bias and the returns to schooling in current and lifetime earnings. NHH Dept. of Economics Discussion Paper (4)

  • Black SE, Devereux PJ, Salvanes KG (2008) Staying in the classroom and out of the maternity ward? The effect of compulsory schooling laws on teenage births. Econ J 118(530):1025–1054

    Article  Google Scholar 

  • Block JH, Hoogerheide L, Thurik R (2012) Are education and entrepreneurial income endogenous? A Bayesian analysis.  Entrepreneurship Res J 2(3). https://doi.org/10.1515/2157-5665.1051

  • Canavati S, Libaers D, Wang T, Hooshangi S, Sarooghi H (2021) Relationship between human capital, new venture ideas, and opportunity beliefs: A meta‐analysis. Strateg Entrep J 15(3):454-477

  • Cardella GM, Hernández-Sánchez BR, Sánchez-García JC (2020) Women entrepreneurship: A systematic review to outline the boundaries of scientific literature. Front Psychol 11:1557

    Article  Google Scholar 

  • Casey JN (2008) Educational curricula: development and evaluation: Nova Publishers

  • Clark D (2011) Do recessions keep students in school? The impact of youth unemployment on enrolment in postcompulsory education in England. Economica 78(311):523-545

  • Clark D, Royer H (2013) The effect of education on adult mortality and health: Evidence from Britain. Am Econ Rev 103(6):2087–2120

    Article  Google Scholar 

  • Cobb-Clark DA, Kassenboehmer SC, Schurer S (2014) Healthy habits: The connection between diet, exercise, and locus of control. J Econ Behav Organ 98:1–28

    Article  Google Scholar 

  • Cobb-Clark DA, Schurer S (2012) The stability of Big-Five personality traits. Econ Lett 115(1):11–15

    Article  Google Scholar 

  • Courtin E, Nafilyan V, Avendano M, Meneton P, Berkman LF, Goldberg M, ..., Dowd JB (2019). Longer schooling but not better off? A quasi-experimental study of the effect of compulsory schooling on biomarkers in France. Social Science & Medicine, 220, 379–386.

  • Crespo L, López-Noval B, Mira P (2014) Compulsory schooling, education, depression and memory: New evidence from SHARELIFE. Econ Educ Rev 43:36–46

  • Cygan-Rehm K, Maeder M (2013) The effect of education on fertility: Evidence from a compulsory schooling reform. Labour Econ 25:35–48

  • de New SC, Schurer S, Sulzmaier D (2021) Gender differences in the lifecycle benefits of compulsory schooling policies. Eur Econ Rev 140:103910

    Article  Google Scholar 

  • DeAngelis CA, Dills AK (2020) Does compulsory schooling affect innovation? Evidence from the United States. Soc Sci Q 101(5):1728–1742

  • Department of Social Services and Melbourne Institute of Applied Economic and Social Research (2021) The Household, Income and Labour Dynamics in Australia (HILDA) Survey, GENERAL RELEASE 20 (Waves 1–20). https://doi.org/10.26193/YP7MNU, ADA Dataverse, V3

  • Diffey L, Steffes S (2017) Age requirements for free and compulsory education. 50-State Review. Education commission of the states

  • Doms M, Lewis E, Robb A (2010) Local labor force education, new business characteristics, and firm performance. J Urban Econ 67(1):61–77

    Article  Google Scholar 

  • Filmer D, Rogers H, Angrist N, Sabarwal S (2020) Learning-adjusted years of schooling (LAYS): Defining a new macro measure of education. Econ Educ Rev 77:101971

  • Fischer M, Karlsson M, Nilsson T, Schwarz N (2020) The long-term effects of long terms–Compulsory schooling reforms in Sweden. J Eur Econ Assoc 18(6):2776–2823

    Article  Google Scholar 

  • Fonseca R, Michaud P-C, Zheng Y (2020) The effect of education on health: evidence from national compulsory schooling reforms. SERIEs 11(1):83–103

    Article  Google Scholar 

  • Fossen FM, Büttner TJ (2013) The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees. Econ Educ Rev 37:66–84

  • Fuchs K, Werner A, Wallau F (2008) Entrepreneurship education in Germany and Sweden: What role do different school systems play? J Small Bus Manag Entrep Dev 15(2):365–381

    Article  Google Scholar 

  • Garcia-Mainar I, Montuenga-Gomez VM (2005) Education returns of wage earners and self-employed workers: Portugal vs. Spain. Econ Educ Rev 24(2):161–170

  • Gilpin GA, Pennig LA (2015) Compulsory schooling laws and school crime. Appl Econ 47(38):4056–4073

    Article  Google Scholar 

  • Gradstein M, Justman M (2000) Human capital, social capital, and public schooling. Eur Econ Rev 44(4–6):879–890

    Article  Google Scholar 

  • Grossman M (1972) On the concept of health capital and the demand for health. J Polit Econ 80(2):223–255

    Article  Google Scholar 

  • Hamilton BH (2000) Does entrepreneurship pay? An empirical analysis of the returns to self-employment. J Polit Econ 108(3):604–631

    Article  Google Scholar 

  • Harmon CP (2017) How effective is compulsory schooling as a policy instrument?. IZA World of Labor, pp 348–348

  • Harmon CP, Oosterbeek H, Walker I (2003) The returns to education: Microeconomics. Journal of Economic Surveys 17(2):115–156

    Article  Google Scholar 

  • Heckman J, Pinto R, Savelyev P (2013) Understanding the mechanisms through which an influential early childhood program boosted adult outcomes. Am Econ Rev 103(6):2052–2086

  • Heckman JJ, Humphries JE, Veramendi G (2018) Returns to education: The causal effects of education on earnings, health, and smoking. J Polit Econ 126(S1):S197–S246

  • Hogendoorn B, Rud I, Groot W, Maassen van den Brink H (2019) The effects of human capital interventions on entrepreneurial performance in industrialized countries. J Econ Surv 33(3):798–826

    Article  Google Scholar 

  • Holm A, Hjorth-Trolle A, Jæger MM (2019) Signals, educational decision-making, and inequality. Eur Sociol Rev 35(4):447–460

  • Huber LR, Sloof R, Van Praag M (2014) The effect of early entrepreneurship education: Evidence from a field experiment. Eur Econ Rev 72:76–97

  • Kassenboehmer SC, Leung F, Schurer S (2018) University education and non-cognitive skill development. Oxford Econ Pap 70(2):538–562

    Article  Google Scholar 

  • Kim PH, Aldrich HE (2005) Social capital and entrepreneurship. Found Trends® Entrep 1(2):55–104

    Article  Google Scholar 

  • Kırdar MG, Dayıoğlu M, Koc I (2016) Does longer compulsory education equalize schooling by gender and rural/urban residence? World Bank Econ Rev 30(3):549–579

    Article  Google Scholar 

  • Kolstad I, Wiig A (2015) Education and entrepreneurial success. Small Bus Econ 44:783–796

  • Landes WM, Solmon LC (1972) Compulsory schooling legislation: An economic analysis of law and social change in the nineteenth century. J Econ Hist 32(1):54–91

    Article  Google Scholar 

  • Li J, Powdthavee N (2015) Does more education lead to better health habits? Evidence from the school reforms in Australia. Soc Sci Med 127:83–91

    Article  Google Scholar 

  • Li M (2006) High school completion and future youth unemployment: New evidence from High School and Beyond. J Appl Economet 21(1):23–53

    Article  Google Scholar 

  • Martin BC, McNally JJ, Kay MJ (2013) Examining the formation of human capital in entrepreneurship: A meta-analysis of entrepreneurship education outcomes. J Bus Ventur 28(2):211–224

    Article  Google Scholar 

  • Marvel MR, Davis JL, Sproul CR (2016) Human capital and entrepreneurship research: A critical review and future directions. Entrep Theory Pract 40(3):599–626

    Article  Google Scholar 

  • Mazzonna F (2014) The long lasting effects of education on old age health: evidence of gender differences. Soc Sci Med 101:129–138

    Article  Google Scholar 

  • McGrath J, Fischetti J (2019) What if compulsory schooling was a 21st century invention? Weak signals from a systematic review of the literature. Int J Educ Res 95:212–226

    Article  Google Scholar 

  • Millan JM, Congregado E, Roman C, Van Praag M, Van Stel A (2014) The value of an educated population for an individual’s entrepreneurship success. J Bus Ventur 29(5):612–632

    Article  Google Scholar 

  • Mincer JA (1974) Schooling and earnings. In: Schooling, experience, and earnings. NBER, pp 41–63

  • Moskowitz TJ, Vissing-Jørgensen A (2002) The returns to entrepreneurial investment: A private equity premium puzzle? Am Econ Rev 92(4):745–778

    Article  Google Scholar 

  • Nordin A (2017) Towards a European policy discourse on compulsory education: The case of Sweden. Eur Educ Res J 16(4):474–486

  • Nybom M, Stuhler J (2014) Interpreting trends in intergenerational mobility

  • Oreopoulos P (2006) Estimating average and local average treatment effects of education when compulsory schooling laws really matter. Am Econ Rev 96(1):152–175

    Article  Google Scholar 

  • Oreopoulos P (2007) Do dropouts drop out too soon? Wealth, health and happiness from compulsory schooling. J Public Econ 91(11–12):2213–2229

    Article  Google Scholar 

  • Parker SC, Van Praag CM (2006) Schooling, capital constraints, and entrepreneurial performance: The endogenous triangle. J Bus Econ Stat 24(4):416–431

    Article  Google Scholar 

  • Pearlin LI, Schooler C (1978) The structure of coping. J Health Soc Behav 19(1):2–21

  • Pischke J-S, Von Wachter T (2008) Zero returns to compulsory schooling in Germany: Evidence and interpretation. Rev Econ Stat 90(3):592–598

    Article  Google Scholar 

  • Psacharopoulos G (1994) Returns to investment in education: A global update. World Dev 22(9):1325–1343

  • Saucier G (1994) Separating description and evaluation in the structure of personality attributes. J Pers Soc Psychol 66(1):141

    Article  Google Scholar 

  • Sexton DL, Bowman-Upton N (1990) Female and male entrepreneurs: Psychological characteristics and their role in gender-related discrimination. J Bus Ventur 5(1):29–36

    Article  Google Scholar 

  • Shakeshaft NG, Trzaskowski M, McMillan A, Rimfeld K, Krapohl E, Haworth CM, Plomin R (2013) Strong genetic influence on a UK nationwide test of educational achievement at the end of compulsory education at age 16. PloS one 8(12):e80341

  • Shanan Y (2023) The effect of compulsory schooling laws and child labor restrictions on fertility: evidence from the early twentieth century. J Popul Econ 36(1):321–358

  • Sorgner A, Fritsch M, Kritikos A (2017) Do entrepreneurs really earn less? Small Bus Econ 49(2):251–272

    Article  Google Scholar 

  • Stephens M Jr, Yang D-Y (2014) Compulsory education and the benefits of schooling. Am Econ Rev 104(6):1777–1792

    Article  Google Scholar 

  • Tyack D (1976) Ways of seeing: An essay on the history of compulsory schooling. Harv Educ Rev 46(3):355–389

    Article  Google Scholar 

  • Van der Sluis J, Van Praag M, Vijverberg W (2008) Education and entrepreneurship selection and performance: A review of the empirical literature. J Econ Surv 22(5):795–841

    Article  Google Scholar 

  • Van Praag M, van Witteloostuijn A, van der Sluis J (2013) The higher returns to formal education for entrepreneurs versus employees. Small Bus Econ 40:375–396

  • Ware J, John E, Gandek B (1994) The SF-36 Health Survey: Development and use in mental health research and the IQOLA Project. Int J Ment Health 23(2):49–73

    Article  Google Scholar 

  • Watson N, Wooden M (2021) The household, income and labour dynamics in Australia (HILDA) survey. Jahrbücher für Nationalökonomie und Statistik 241(1):131–141

  • Williams DR (2003) Returns to education and experience in self-employment: evidence from Germany. J Context Econ-Schmollers Jahrb 1:139–150

    Article  Google Scholar 

Download references

Funding

No funding to declare.

Author information

Authors and Affiliations

  1. Villanova School of Business, Villanova University, 800 E. Lancaster Avenue, Villanova, PA, 19085, USA

    Pankaj C. Patel

Authors
  1. Pankaj C. Patel
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Pankaj C. Patel.

Ethics declarations

Disclosure of potential conflicts of interest

The authors have no conflicts of interest to declare that are relevant to the content of this article.

Informed consent

Not applicable.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendix

Appendix

Table 7 Correlations
Full size table
Table 8 Estimates for educational outcomes
Full size table
Table 9 Estimates for non-self-employment types of outcomes
Full size table
Table 10 Effects by duration spells in managerial, professional, service and clerks, and manual labor employment
Full size table
Table 11 Main estimates based on excluding individuals born in 1949 in South Australia and 1950 in Victoria
Full size table

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Patel, P.C. Saved by the bell? The effects of compulsory schooling laws on self-employment and earnings in Australia. J Evol Econ 34, 227–296 (2024). https://doi.org/10.1007/s00191-023-00846-2

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00191-023-00846-2

Keywords

JEL Classification

Search

Navigation