Compensatory advantage and inequality in educational aspirations

Using two administrative and survey-based datasets from Hungary, I look at how children from different socioeconomic backgrounds update their educational aspirations in response to having to repeat a grade late in primary school. I find that grade retention is detrimental to aspirations and later secondary school track choice, and on average, it affects children of lower socioeconomic backgrounds more adversely. The average effect masks heterogeneities by the reasons for repeating: those children who are likely to repeat seventh grade due to poor mathematics performance do not change their aspirations significantly after retention, regardless of their socioeconomic background. However, they are less likely to attend a secondary school track that provides access to tertiary education. As we move towards higher performers in mathematics - and consequently, more heterogeneous reasons for repeating -, retention results in a larger drop in aspirations and the probability of a secondary track ending with a high school diploma. In both outcomes, high socioeconomic status largely and, in some cases, entirely offsets the adverse effects.