Human Capital Investment and Nonparticipation: Evidence from a Sample with Infinite Horizons (Or: Jewish Father Stops Going to Work)

Abstract

Between 1970 and 1993 labor force participation of prime aged Israeli males dropped from 94% to 86%, the lowest rate in the developed world. Expansion of military service was the main cause in the 1970s but participation continued to fall in the 1980s despite the shrinking population share of the military. Along with causes that are common to other countries — increased disability and discouraged work-seekers — a unique Israeli feature is increased full-time yeshiva (ultra-orthodox school) attendance. Yeshiva attendance increased through the 1980s despite the low return to investment in yeshiva education, especially when compared to the increasing returns to secular education and to labor market experience. We investigate various explanations for these trends.

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