Labor market dynamics and the expectations of finding a job are believed to be strong determinants of individuals' educational decisions (see Belzil and Leonardi, 2007; Raaum and Røed, 2006). Indeed, labor market conditions can exercise two separate effects on schooling decisions. On the one hand, unemployment can increase the risk of school dropout and undermine academic performance via a first channel that we will refer to as the "family" effect of unemployment. Parental unemployment can lead to a deterioration in household conditions and in educational resources. In extreme cases, it may even compel young adults to complement the household income (Montmarquette et al., 2007). On the other hand, unemployment may have a positive influence on the individual demand for education via a "local labor market" effect. As labor opportunities worsen, the opportunity cost of education falls, and individuals are encouraged to stay in school (Albert, 2000). Additionally, both types of unemployment effect ("family" and "local labor market") may be heterogeneous. For example, students from lower socioeconomic groups might be more sensitive to labor market conditions (Ehrenberg and Brewer, 1994). At the same time, male students may be more responsive to changes in the labor market, particularly in societies where differences in gender stereotypes are accentuated. The aim of this paper is to provide a better understanding of the links between labor market conditions and academic performance by disentangling the aforementioned effects of unemployment. The contribution of this study is, therefore, threefold: first, it provides new evidence on the link between labor market conditions and educational decisions; second, it quantifies separately the two possible effects of unemployment on academic performance at age 15: i) an increase in the risk of school dropout (family effect) and ii) an incentive for students to remain in school (local labor market effect); third, it analyses heterogeneous effects of the "family" and "local labor market"-proxied through the unemployment rate of the school community-effects. We address these research questions by focusing on the case of Spain, which constitutes a particularly interesting case study. Spain has recently experienced a period of intense economic growth and development (1996-2007), during which the construction and service sectors boosted labor opportunities for young adults and low-skilled workers (Arranz and García-Serrano, 2012)-between 2000 and 2007, the general rate of unemployment fell from 10.6 to 8.3%. This was followed by an economic downturn, so that by 2008 the adult unemployment rate had climbed back up to 11.3%. Thereafter, the situation deteriorated rapidly and the general unemployment rate reached 24.8% in 2012.