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Grade Failure, Drop out and Subsequent School Outcomes:
Quasi-Experimental Evidence from Uruguayan Administrative Data

Marco Manacorda
This version: November 2006
QMUL, CEP and STICERD (LSE) and CEPR

This paper uses administrative longitudinal micro data on about 100,000 Uruguayan students in public non-vocational Junior High school (grades 7-9) to identify the causal effect of grade failure on students' subsequent school outcomes. Exploiting the discontinuity in promotion rates induced by a rule that establishes that a pupil missing more than 25 days during the school year will automatically fail that grade I show that grade failure leads to substantial drop out and lower educational attainment after 4 to
5 years since the time when failure first occurred. Complementary evidence based on a change in the regime of grade promotion provides additional support for this conclusion.

Keywords: grade retention, school drop out, age-grade distortion, regression discontinuity.
JEL codes: I21, I22, J20

I am grateful to Jerome Adda, David Card, Thomas Lemieux, Alan Manning, Guy Michael, Justin McCrary, Enrico Moretti,
Barbara Petrongolo, Tommaso Valletti, Steve Pischke, Miguel Urquiola and seminar participants at UC Berkeley, LSE,
Paris-Jourdan, University of Toulouse, IGIER-Bocconi, the Universidad de la Republica (Montevideo) and the Gerencia de
Planeamiento y Evaluación de la Gestión Educativa de ANEP for many helpful comments and suggestions. I am also grateful to Veronica Amarante, Rodrigo Arim, Federico Bachino, Marisa Bucheli, Carlos Casacuberta, Darwin Caraballo,
Santiago Cardozo, Fernando Filgueira, Laura Galletti, Cecilia Llambi, Estela Montado, Renato Opertti, Marcelo Pereira,
Andres Peri, Alejandro Retamoso, Carmen Tornaria and especially to Hilda Surraco and Andrea Vigorito for many helpful discussions about the school system in Uruguay and help with the data.

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