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Modeling the Signaling Value of the GED with an Application to an Exogenous Passing Standard Increase in Texas

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Author Info
Magnus Lofstrom () (University of Texas at Dallas and IZA)
John Tyler () (Brown University and NBER)

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Abstract

In this paper we develop a simple model of the signaling value of the GED credential. The model illustrates necessary assumptions for a difference-in-difference estimator, which uses a change in the GED passing standard, to yield unbiased estimates of the signaling value of the GED for marginal passers. We apply the model to the national 1997 passing standard increase which affected GED test takers in Texas. We utilize unique data from the Texas Schools Micro Data Panel (TSMP) which contain demographic and GED test score information from the Texas Education Agency linked to pre- and post-test taking Unemployment Insurance quarterly wage records from the Texas Workforce Commission. Comparing Texas dropouts who acquired a GED before the passing standard was raised in 1997 to dropouts with the same test scores who failed the GED exams after the passing standard hike, we find no evidence of a positive GED signaling effect on earnings. However, we find some evidence which suggest that our finding may be due to the low GED passing threshold that existed in Texas for an extended period.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2953.

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Length: 65 pages
Date of creation: Jul 2007
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Handle: RePEc:iza:izadps:dp2953

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Related research
Keywords: GED; signaling; returns to education; natural experiment;

Find related papers by JEL classification:
I2 - Health, Education, and Welfare - - Education
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
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  1. Richard J. Murnane & John B. Willett & John H. Tyler, 2000. "Who Benefits from Obtaining a GED? Evidence from High School and Beyond," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 23-37, February. [Downloadable!] (restricted)
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  2. Cameron, Stephen V & Heckman, James J, 1993. "The Nonequivalence of High School Equivalents," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 1-47, January. [Downloadable!] (restricted)
    Other versions:
  3. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
  4. James J. Heckman & Yona Rubinstein, 2001. "The Importance of Noncognitive Skills: Lessons from the GED Testing Program," American Economic Review, American Economic Association, vol. 91(2), pages 145-149, May. [Downloadable!] (restricted)
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