Does Money Talk to School Administrations... - Jan. 2009

or: Did the 2006 Covenants Reduce School Dropouts in the Netherlands?

Early school-leaving is considered to be one of the major problems in Dutch education. And many initiatives have been undertaken to reduce the numbers of dropouts. In the Netherlands dropouts are defined as pupils aged below 23 that leave school before having reached a certain level of education, called the ‘start qualification’. This start qualification is considered to be the minimum level of education needed to participate well in the labor market. The Dutch government has committed itself to the Lisbon goal of a halving of school dropout between 2000 and 2010. To attain this goal, various new measures have been introduced and budgets for existing measures have been raised over the last couple of years.

One of the initiatives made was a classical money incentive scheme by the Ministry of Education. Wag a bag of money in the faces of school administrations to perform better in this respect.

In order to reduce the number of dropouts in the school year 2006-2007 the Ministry offered a financial incentive scheme to 14 of the 39 national regions. The scheme provided a reward of 2000 euro per school dropout less than the number recorded in 2006-07. The ambition of the scheme was a reduction of the total number of school dropouts by at least 10 percent in one year.

A recent study by the Netherlands Bureau for Policy Analysis evaluated the effectiveness of this school dropout policy by comparing the change in school dropout in these 14 regions with the change in the remaining 25 regions before and after the introduction of the policy. The researchers observed a modest decline in the probability of dropping out in the 14 covenants regions. However, the decline in the non-covenant regions was equally large. They, therefore, found no significant effect on the probability of dropping out in the post-covenant year. In both regions the number of dropouts fell by 3 percent in the year after the covenants. The nationwide decline can be largely contributed to being due to changes in the student populations in the pre- and post-covenant year.

The covenants also gave a reward to regions for a successful reintegration of dropouts in order to reduce school dropout in that way. However, estimates for the effect on the re-enrolment of previous dropouts are statistically insignificant as well. The researchers concluded that the 2006 covenant policy was not effective in reducing early school-leaving.