Returns to Education Quality for Low-Skilled Students: Evidence from a Discontinuity

Abstract

This paper studies the labor market returns to quality of higher education for low-skilled students. Using a regression discontinuity design, we compare students who marginally pass and marginally fail the French high school exit exam from the first attempt. Threshold crossing leads to an improvement in the quality, but has no effect on the quantity, of higher education pursued. Specifically, students who marginally pass are more likely to enroll in STEM majors and universities with better peers. Further, marginally passing increases earnings by 13.6 percent at the age of 27 to 29. Our findings show that low-skilled students experience large gains from having the opportunity to access higher quality postsecondary education.JEL Classification: H52, I21, I28, J24

Impact of a Tertiary Eligibility Threshold on Tertiary Education and Earnings: A Discontinuity Approach

“…This study has much in common with recent studies using discontinuities in admission systems (Fan et al 2017;Hastings, Neilson, and Zimmerman 2013;Hoekstra 2009;Kirkeboen, Leuven, and Mogstad 2016;Öckert 2010;Zimmerman 2014) and high school exit exams (Canaan and Mouganie 2018) to estimate the payoff to tertiary education. The fundamental difference is that we use a different approach for identifying the marginal group.…”

“…Goodman, Hurwitz, and Smith () show that the effect of attending a 4‐year college is partly caused by college quality . Canaan and Mouganie (), who also study a low‐skilled group, estimate the threshold effect of passing the French high school exit exam and conclude that passing the exam increases university quality (but not quantity) and earnings.…”

“…Other studies investing the impact of college quality on labor market outcomes show that quality matters (see e.g., Black and Smith 2006) and the variation in quality between colleges seem to increase in the United States (Hoxby 2009). Canaan and Mouganie (2018), who also study a low-skilled group, estimate the threshold effect of passing the French high school exit exam and conclude that passing the exam increases university quality (but not quantity) and earnings.…”

“…Another similarity with the study by Canaan and Mouganie (2018) is that students in the study country (France) are given a second attempt to pass the test, an opportunity that adult education provides in Sweden. On the other hand, we study low-performing students in a tuitionfree schooling system, 3 in other countries liquidity constraints is an additional barrier for this group of students.…”

“…To our knowledge, only Zimmerman (2014) and Canaan and Mouganie (2018) have studied a similar group of students. Our study is most similar to that by Canaan and Mouganie (2018), who use the first attempt on "high stake" exit exams, where passing is a requirement for enrolling in higher education, to analyze tertiary enrollment and earnings.…”