Todd R. Stinebrickner and Ralph Stinebrickner
please direct correspondence to
Todd R. Stinebrickner
Dept. of Economics
The Social Science Centre
The University of Western Ontario
London Ontario Canada n6a 5c2
phone 519 679-2111 ext. 5293
fax 519 661-3666
Unique new data from a college with a mandatory work-study program are used to examine the relationship between working during school and academic performance. Particular attention is paid to the importance of biases that are potentially present because the number of hours that are worked is endogenously chosen by the individual. A “naive” OLS regression, which indicates that a positive and statistically significant relationship exists between hours-worked and grade performance, highlights the potential importance of endogeneity bias in this context. Although a fixed effects estimator suggests that working an additional hour has an effect on grades which is quantitatively very close to zero, we suggest that there are likely to exist causes of endogeneity which are not addressed by the fixed effects estimator. Indeed, an instrumental variables approach, which takes advantage of unique institutional details of the work-study program at this school, indicates that working an additional hour has a negative and quantitatively large effect on grade performance at this school. The results suggest that, even if results appear “reasonable,” a researcher should be cautious when drawing policy conclusions about the relationship between hours-worked and a particular outcome of interest unless he/she is confident that potential problems associated with the endogeneity of hours have been adequately addressed.2 This may be a reasonable scenario for students working low to moderate number of hours. However, students who work large numbers of hours may be individuals who are not particularly interested in academics.
Important policy decisions have been based on beliefs about the relationship between working during school and a student’s current and future academic performance. However, although some previous research examines these matters, currently no consensus exists on the effect that youth employment has on these outcomes. If working during high school has a harmful effect on academic performance, it might be reasonable to strengthen laws that regulate the number of hours that youth can work. Similarly, if working during college is detrimental, individuals who need to work during college in order to pay tuition costs may be at a disadvantage when compared to students from wealthier backgrounds, and work-study based financial aid programs may have certain undesirable side effects. Difficulty in determining the true impact that work has on academic performance arises largely because the number of hours that an individual works is endogenously chosen. For example, it is sometimes posited that individuals who fare well academically in school tend to be blessed with high levels of “motivation” that may also make them more likely than other students to become involved with nonacademic activities such as work. 2
In empirical work, if “motivation” is not fully observed, some of the variation in academic performance that should be attributed to differences in motivation may mistakenly be attributed to differences in work status. Thus, in this scenario, simple econometric models may understate the negative impact that working has on school performance. Indeed, as discussed in the next section, previous studies have sometimes found that academic performance is highest among individuals who are working a moderate number of hours.
Credibly dealing with the endogeneity of work hours in empirical work is typically very difficult.3 See Bound et al. (1995) for a discussion of the potential problems that can arise in instrumental variables estimation when the correlation...