The Signaling Value of Central School Exams

Guido Schwerdt, Ludger Woessmann
Ifo Insitute, Germany

While the fact that students perform better in school systems with curriculum-based external exit exams is well documented, little is known about the channels through which this reduced-form pattern arises. One possible channel is that central exams increase the signaling value of high school leaving grades, so that students increase their learning effort to reap later labor-market benefits. This paper tests this channel in a differences-in-differences framework, estimating whether earnings differences between high and low grades are greater in German States with central exit exams "Abitur" than ones without them. There is clear evidence that the earnings premium for high-school leaving grades is bigger when they are based on central exams. Central exams also increase the number of interviews and job offers per application.

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