school and work: Estimates of 
1
, which are positive with OLS, become negative and imprecisely measured under 2SLS.
In sum, our main fi nding is that following improved wage offers, young men gen- erally increase their labor market participation though two channels: a a reduction
in school enrollment and; b the re- entry into the labor market of some individu- als who were neither in school nor employed. Estimates from 2SLS provide no evi-
dence—at least in the aggregate—that young men start combining school and work in greater numbers in response to increased wages.
These qualitative patterns hold when we restrict our attention to young men with a high school diploma, a trades certifi cate or diploma, or more education henceforth,
young men with a high school diploma or more education Table 2. For this subsam- ple, the 2SLS estimator indicates that a ten- point increase in log after- tax real wages
raises labor market participation by between 2.7 and 3.4 percentage points, reduces school enrollment by between 3.3 and 4.1 percentage points, and lowers the likelihood
of being neither in school nor employed by between 0.9 and 1.1 percentage point.
A different story emerges for young men with no high school diploma. For this subsample, there is virtually no evidence that increased wages lead to a drop in
school enrollment. Only OLS parameter estimates based on the 15th percentile are negative and statistically signifi cant at conventional levels in school enrollment
equations Table 3. In response to improved wage offers, less- educated young men appear to increase their labor market participation by making transitions from be-
ing neither in school nor employed into employment and by combining school and work in greater numbers. Parameter estimates from 2SLS indicate that a ten- point
increase in log after- tax real wages boosts labor market participation by between 5.3 and 8.7 percentage points, from a baseline employment rate of about 50 percent.
These numbers imply a substantial wage elasticity of labor market participation for less- educated young men that varies between 1.07 and 1.75.
33,34
A ten- point increase in log after- tax real wages also lowers the likelihood of being neither
in school nor employed by between 2.3 and 3.7 percentage while increasing the proportion of individuals who combine school and work by between 2.5 and 4.0
percentage points.
V. Robustness Checks
A. Estimator Choice, Model Specifi cation, and Weighting Scheme
Our main fi nding is robust to the use of alternative: a estimators, b functional forms, and c weighting schemes. First, most of the patterns found in Table 1 under
2SLS hold when we use grouping estimators EWALD and UEVE and two group defi nitions: a a basic defi nition, in which group fi xed effects fully interact four age
33. The large participation wage elasticity we find for young men with no high school diploma is consistent with the finding of Bargain, Orsini, and Peichl 2012 that wage elasticities for single men are higher at
lower- income quintiles than at other quintiles. 34. Wage elasticities of labor market participation for other young men computed from Table 2 vary be-
tween 0.44 and 0.55. A one- sided test that participation wage elasticities are larger for young men with no high school diploma than for other young men rejects the null hypothesis at the 7 percent level.
Table 4 Real Wages and Young Men’s Outcomes – Grouping Estimators
Group defi nition Basic
Alternative Percentile
15th 1
45th 2
15th 3
45th 4
A Being employed I.
EWALD 0.256
0.137 0.267
0.180 0.034
0.037 0.040
0.040 II.
UEVE 0.165
0.124 0.204
0.174 0.028
0.031 0.031
0.034 B Being enrolled in school
I. EWALD
–0.101 –0.036
–0.136 –0.072
0.042 0.049
0.048 0.055
II. UEVE
–0.085 –0.045
–0.127 –0.082
0.031 0.033
0.035 0.037
C Being neither enrolled in school nor employed I.
EWALD –0.082
–0.063 –0.082
–0.087 0.021
0.022 0.023
0.021 II.
UEVE –0.042
–0.058 –0.053
–0.084 0.018
0.019 0.018
0.019 D Being enrolled in school and employed
I. EWALD
0.073† 0.038
0.049 0.021
0.040 0.041
0.043 0.046
II. UEVE
0.037 0.022
0.024 0.008
0.026 0.027
0.029 0.030
Group defi nition Basic
Alternative Number of clusters groups
164 97
Number of grouped observations 1,128
729 Average sample size per grouped
observation 151.3
243.2
Source: Authors’ calculations from Labour Force Survey. Notes: The sample consists of unmarried men aged 17–24 with no children. The numbers show the estimated
impact of log after- tax real wages on the probability of being employed, being enrolled in school, being neither enrolled in school nor employed, and being both enrolled in school and employed. Separate regressions are run
based on various percentiles used for imputing the wages of nonemployed men. All regressions include group fi xed effects, year effects, month indicators, a renter indicator, a CMA CA indicator, the unemployment rate, and the rate
of involuntary part- time employment defi ned at the ageeducationregion level, as well as province- specifi c log real minimum wages, log average real tuition fees for a bachelor’s degree, and levels of Social Assistance income
potentially available to single individuals. Standard errors clustered at the ageeducationregion level are between parentheses for EWALD.
†: p- value 0.10; : p- value 0.05; : p- value 0.01; : p- value 0.001.
categories, seven education levels, and eight regions; and b an alternative defi nition, which interacts two age groups with the seven education and eight region catego-
ries Table 4. While estimates from grouping estimators are generally smaller in abso- lute value than those from 2SLS, they confi rm that increased real wages are associated
with rising employment rates and a reduced likelihood of young men being neither in school nor employed.
35
UEVE estimates also confi rm that increased real wages reduce school enrollment: Of the eight wage parameter estimates four of which are shown in
Table 4 associated with the two group defi nitions and the four percentiles considered, six are statistically signifi cant at the 5 percent level.
Second, our main fi nding is robust to functional form. As Appendix Table A2 shows, moving from a level- log wage model to a log- log wage model when using EWALD
and our basic group defi nition yields fairly similar wage elasticities of employment and the likelihood of being neither in school nor employed, both for all young men and
for young men with a high school diploma or more education. For these two samples, wage elasticities of school enrollment increase in absolute value when moving to
log- log specifi cations, thereby strengthening our fi nding that reductions in school enrollment are a second channel through which relatively more- educated young men
increase their labor market participation.
36
Third, considering all young men or those with a high school diploma or more education, both weighted and unweighted 2SLS estimates confi rm that the growth in
young men’s labor market participation that follows rising wages comes from a drop in school enrollment and the re- entry into the labor market of some who were neither
in school nor employed rather than an increase in the proportion combining school and work Appendix Table A3. Unweighted 2SLS estimates also confi rm that young
men with no high school diploma do not appear to reduce school enrollment following improved wage offers. For this subsample, unweighted wage parameter estimates for
various outcomes are generally insignifi cant at conventional levels.
B. Source of Decline in School Enrollment
