Leave them Kids Alone! The Positive Effect of Abolishing Grade Retention on Pupils' Dropout Rates: Evidence from a Policy Change

Repeating a grade during the first years of education may reduce children’s and parent’s motivation, increase family and school costs and pupil’s dropout likelihood. While most of the research con-clude no gains from... [ view full abstract ]

Repeating a grade during the first years of education may reduce children’s and parent’s motivation, increase family and school costs and pupil’s dropout likelihood. While most of the research con-clude no gains from grade retention the debate is still open, moreover in mid-income countries. This paper evaluates the impacts of an exogenous policy change in Mexico which eliminates retention in-grade for all first to third grade students. This reform helped schools to reduce repetition rates from varying higher levels to almost zero in one academic year. We use a panel of schools to exploit such variation in a short-span of time. Estimations coming from two-way fixed effects models show an average reduction in dropout rates after reform implementation, specifically in richer schools and for children with pre-school education. Further findings suggest that eliminating the ”threat” of grade repetition did not affect pupil’s performance in standardized tests. The results are robust to different specifications, a secondary methodology and falsification tests.