In this paper, we develop and structurally estimate a sequential model of high school attendance and work decisions. The model's estimates imply that youths who drop out of high school have different traits than those who graduateᎏthey have lower school ability andror motivation, they have lower expectations about the rewards from graduation, they have a comparative advantage at jobs that are done by nongraduates, and they place a higher value on leisure and have a lower consumption value of school attendance. We also found that working while in school reduces school performance. However, policy experiments based on the model's estimates indicate that even the most restrictive prohibition on working while attending high school would have only a limited impact on the high school graduation rates of white males.

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for constructive comments, M. Minni of INSEE for his helpfulness in providing data on French aggloneratioiiS and Aditya Bhattacharjea, Yuval Nachtom, and Akiko Tamura for their excellent research assistance. Akiko Tamura constructed population data for Japanese urban agglomerations from census figures on the population of Japanese cities. This paper is part of NBER's research program in International Trade and Investment. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.

We analyze an equilibrium search model with three sources for wage and unemployment differentials among workers with the same (observed) human capital but different appearance (race): unobserved productivity, search intensities, and discrimination due to an appearance-based employer disutility factor. We show that the structural parameters are identified using labor market survey data. Estimation results for a black and white high school graduate sample imply: black productivity is 3.3% lower than white productivity; the employer's disutility factor is 31% of the white's productivity level; and 56% of firms have a disutility factor toward blacks.