How states can reduce the dropout rate for undocumented immigrant youth: The effects of in-state resident tuition policies

•Examined in-state resident tuition (IRT) policies targeting undocumented youth.•Policies reduced the dropout rate for undocumented youth by eight percentage points.•Endogeneity tests showed that the policy effect did not exist for non-targeted groups.•No evidence that IRT policies have a positive spillover effect on other Latino groups. As of December 2011, 13 states have adopted an in-state resident tuition (IRT) policy that provides in-state tuition to undocumented immigrants and several other states are considering similar legislation. While previous research focuses on how IRT policies affect college entry and attainment, this study examines the effect these policies have on high school dropout behavior. Using the Current Population Survey (CPS) and difference-in-difference models, this paper examines whether IRT policies reduce the likelihood of dropping out of high school for Mexican foreign-born non-citizens (FBNC), a proxy for undocumented youth. The policy is estimated to cause an eight percentage point reduction in the proportion that drops out of high school. The paper develops an integrated framework that combines human capital theory with segmented assimilation theory to provide insight into how IRT policies influence student motivation and educational attainment at the high school level.