No Pass No Drive: Education and Allocation of Time

Abstract: More than one-third of all public high school students, majority being boys and blacks, dropout of school each year. This has put the question of how to spend educational resources in a cost-effective way prominent on the research agenda. In this paper, we study the effect of a large scale and low cost negative incentive policy, the No Pass No Drive (NPND) law, on education outcomes. Since the late 1980s, several U.S. states have introduced these laws that set minimum academic requirements for teenagers to obtain driving licenses. Using data from the American Community Survey (ACS) and Monitoring the Future (MTF), we exploit variation across state, time, and cohort to show that NPND laws led to a 6.4 percentage point increase in the probability of graduating from high school among black males. Further, we show that NPND laws were effective in reducing truancy and increased time allocated to school-work at the expense of leisure and work.