# **Introduction**

Low education quality on average, inequalities in both access and quality within countries, and risks that affect education for specific subgroups are widely recognized challenges in Central American education systems, and high dropout rates are a reflection of these challenges.<sup>2</sup> Dropout is a growing cause of concern in Central America, and in Latin America as a whole, due to its multiple consequences for economic productivity, the inclusiveness of growth, social cohesion, and increasing youth risks. In particular, as countries look to accelerate their growth, the inadequate skills of their workforces present a key constraint (World Bank 2014, 2015a and 2015b). Compared to countries at similar levels of development, countries in Central America are behind in terms of the educational attainment of their populations. As shown in Figure 1, fewer young adults in Costa Rica have completed secondary compared to structural peers, other uppermiddle income countries, and the OECD, while Guatemala, Honduras, and Nicaragua all lag behind the lower-middle income country average.

This paper presents an analysis of school dropout, focusing on secondary dropout, in Central America, with the goal of providing a systematic overview of the dropout phenomenon, including recent trends, potential causes and consequences, and what works to reduce dropout. To do this, we build on substantial recent research in Latin America on dropout and youth idleness (neither attending school nor working), in particular the conceptual framework presented in Behrman, de Hoyos, and Szekely (2015), the cross-country cohort analysis by Bentaouet-Kattan and Székely (2015), and the narrative review by Almeida, Fitzsimons, and Rogers (2015).<sup>3</sup> The paper is divided into five sections. Section 1 presents a simple conceptual framework of the factors involved in dropout as well as the data for the empirical analysis, and discusses the patterns of dropout over the past several decades, comparisons with the rest of Latin America, and differences across subgroups within each country. Section 2 documents the economic consequences of dropping out, while Section 3 turns to the drivers of dropout, presenting empirical correlations and the available causal evidence. Section 4 considers the global evidence on what works to reduce dropout, and how this evidence informs the Central American experience. Section 5 concludes.

> 2 Highlighted for instance by Bruns and Luque (2015) and Cabrol and Székely (2013), among others.

> 3 A related study by Bassi, et.al. (2015) focuses on measuring secondary school dropout and graduation rates for the countries in the region, by using snapshots of household surveys up to the late 2000s. These authors conclude that dropout has declined, and point to the increase of school services and in the returns to secondary education as main causes for the reduction. Other related recent studies that analyze school dropout in the region, although not as the central focus of their investigation are Cárdenas, et.al. (2015) and Székely and Karver (2015), who look at the consequences of leaving school prematurely, and particularly the relation between dropout and the percentage of youth that are neither in school nor working. Another useful reference is the study by UNICEF (2013), which focuses on school coverage and attendance rates at the preschool and primary levels, for Central America specifically. The study clearly illustrates that for some of the countries in the sub-region, primary school participation continues to be a relevant challenge. Previous studies on the education sector of Latin America that include secondary dropout as part of their analysis (although not as the main focus) are World Bank (2005), and UNESCO (2008).

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