In addition to the evidence already presented, recent developments in behavioral economics also help shed light on the decision-making process that leads to dropout. As described in the 2015 World Development Report, individuals more often make decisions based on mental models, drawing on information in their immediate social contexts and recent experiences, rather than a careful weighing of all costs and benefits. Individuals also differ in what they even consider as being choices within their own power to make. Some recent qualitative research on youth and particularly on dropouts helps to highlight these factors and their potential policy implications.

Dropping out of school is often not a discrete decision, but the culmination of an ongoing process of disengagement. Rich administrative data from the United States and other high-income countries has shown that students who will eventually drop out prior to completing secondary school can be reliably identified in primary school, based on their attendance, behavioral records, and course performance (Gardner Center 2011; Frazelle and Nagel 2015). Interviews with youth in Central America who have dropped out reflect these early origins of their ultimate decision. In Costa Rica and Panama, many dropouts report having had trouble passing courses in the past and sometimes repeating grades (Programa Estado de la Nacion 2013; UNICEF 2015). Students with unaddressed learning deficits may get stuck at a grade level while their peers move on, or they may be promoted to higher grades but unable to follow overly rapid curricula – in either case, they are likely to eventually give up, or to be pushed out by school policies (Pritchett and Beatty 2015).

Poor or excluded youth may lack the agency to actively make the decision to drop out. In contexts of poverty, individuals may suffer from excessive cognitive burdens in navigating the challenges of daily life, leaving them little room for long-term planning (Mullainathan and Shafir 2013). Living in conditions of poverty or social and economic exclusion also affects individuals’ attitudes about themselves and their place in the world: they have lower aspirations and lower selfconfidence, reducing their propensity to deliberatively plan for the future (World Bank 2015c). Interviews with adolescent girls in Nicaragua reflect this. Among the middle class, adolescent girls articulate specific and concrete aspirations and plans for their own futures, and directly connect educational achievement to achieving these plans. In contrast, poor girls are more focused on short-term survival and, while generally believing in the value of education, do not apply it directly to themselves (World Bank 2015d).

Adolescence itself is a turbulent time cognitively and socio-emotionally, when decision-making may be lead to sub-optimal outcomes. While all individuals deviate substantially from the purely rational model, adolescents deviate in particular ways which can influence their decisions about human capital investment (O’Donoghue and Rabin 2001). In particular, teenagers have been shown to overestimate their medium-term risk of death, underestimate the consequences of their actions, and have a stronger taste for both risk-taking and peer conformity more than adults. These factors can contribute to decision-making that is myopic and/or time-inconsistent, and lead to suboptimal outcomes like dropping out of school too early.

Adult support and guidance, or the lack of it, is an important factor in the dropout process for many adolescents. In addition to the ways in which parents influence the human capital investments of youth discussed in previous sections, adults more broadly can have important impacts. Dropouts surveyed in Panama cited negative experiences with teachers, and many “dropped out” because they were ultimately denied registration or expelled. In addition, students with similar academic histories who persisted in school tend to describe having more support from parents or other adults 21