The Information Value of Central School Exams

39 Pages Posted: 4 Sep 2015

See all articles by Guido Schwerdt

Guido Schwerdt

University of Konstanz - Faculty of Economics and Statistics

Ludger Woessmann

Ifo Institute for Economic Research; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Munich - Ifo Institute for Economic Research

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Abstract

The central vs. local nature of high-school exit exam systems can have important repercussions on the labor market. By increasing the informational content of grades, central exams may improve the sorting of students by productivity. To test this, we exploit the unique German setting where students from states with and without central exams work on the same labor market. Our difference-in-difference model estimates whether the earnings difference between individuals with high and low grades differs between central and local exams. We find that the earnings premium for a one standard-deviation increase in high-school grades is indeed 6 percent when obtained on central exams but less than 2 percent when obtained on local exams. Choices of higher-education programs and of occupations do not appear major channels of this result.

Keywords: central exit exams, labor-market sorting, earnings, measurement error, difference-in-difference, Germany

JEL Classification: I20, J24, J31

Suggested Citation

Schwerdt, Guido and Woessmann, Ludger, The Information Value of Central School Exams. IZA Discussion Paper No. 9122, Available at SSRN: https://ssrn.com/abstract=2655071 or http://dx.doi.org/10.2139/ssrn.2655071

Guido Schwerdt (Contact Author)

University of Konstanz - Faculty of Economics and Statistics ( email )

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78457 Konstanz
Germany

Ludger Woessmann

Ifo Institute for Economic Research ( email )

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Munich
Germany
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++49 89 9224 1460 (Fax)

HOME PAGE: http://www.cesifo.de/link/woessmann_l.htm

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