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Estimating the Impact of the GED on the Earnings of Young Dropouts Using a Series of Natural Experiments

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  • John H. Tyler
  • Richard J. Murnane
  • John B. Willett

Abstract

The General Educational Development (GED) credential has become the primary 'second chance' route to high school certification for school dropouts in the United States. Despite the widespread use of the GED, however, bias due to self-selection has limited our knowledge about the effects of the credential on the labor market outcomes of dropouts. This paper uses a series of natural experiments created by interstate variation in GED passing standards to reduce self-selection bias in estimates of the impact of the GED on the earnings of young dropouts. To exploit the natural experiments, we use a unique merged data set containing the GED test scores and Social Security earnings of a sample of 16-21 year-old dropouts who attempted the GED in 1990. As a result of our research design and the fact that lower-scoring GED candidates receive very little post-secondary education, our results primarily measure the labor market signaling value of the GED. For dropouts who have indicated a desire to acquire the credential and whose skills place them on the margin of passing the GED exams, we find that acquisition of a GED increases the 1995 earnings of young white dropouts by 10-19 percent. These results are robust to experiments that use different treatment and comparison groups, and they withstand sensitivity analyses that explore possible violations of our identifying assumptions. We find no statistically significant evidence that the GED increases the earnings of young nonwhite dropouts, a result that we attribute to a

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6391.

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Date of creation: Feb 1998
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Publication status: published as Quarterly Journal of Economics (May 2000), forthcoming.
Handle: RePEc:nbr:nberwo:6391

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  1. 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.
  2. Kevin Lang, 1992. "Does the Human-Capital/Educational-Sorting Debate Matter for Development Policy?," NBER Working Papers 4052, National Bureau of Economic Research, Inc.
  3. David Card & Alan Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," Working Papers 694, Princeton University, Department of Economics, Industrial Relations Section..
  4. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-95, October.
  5. Joshua D. Angrist, 1998. "Estimating the Labor Market Impact of Voluntary Military Service Using Social Security Data on Military Applicants," Econometrica, Econometric Society, vol. 66(2), pages 249-288, March.
  6. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages F672-94, November.
  7. James J. Heckman & Jeffrey A. Smith, 1995. "Assessing the Case for Social Experiments," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 85-110, Spring.
  8. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  9. Bruce D. Meyer, 1989. "A Quasi-Experimental Approach to the Effects of Unemployment Insurance," NBER Working Papers 3159, National Bureau of Economic Research, Inc.
  10. Richard J. Murnane & John B. Willett & Kathryn Parker Boudett, 1997. "Does a G.E.D. lead to more training, post-secondary education, and military service for school dropouts?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(1), pages 100-116, October.
  11. Stiglitz, Joseph E, 1975. "The Theory of "Screening," Education, and the Distribution of Income," American Economic Review, American Economic Association, vol. 65(3), pages 283-300, June.
  12. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-61, April.
  13. Lang, Kevin & Kropp, David, 1986. "Human Capital versus Sorting: The Effects of Compulsory Attendance Laws," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 609-24, August.
  14. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
  15. Richard J. Murnane & John B. Willett & Kathryn Parker Boudett, 1997. "Does Acquisition of a GED Lead to More Training, Post-Secondary Education, and Military Service for School Dropouts?," NBER Working Papers 5992, National Bureau of Economic Research, Inc.
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Cited by:
  1. Coneus, Katja & Gernandt, Johannes & Saam, Marianne, 2009. "Noncognitive skills, school achievements and educational dropout," ZEW Discussion Papers 09-019, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. John H. Tyler & Richard J. Murnane & John B. Willett, 2000. "Do the Cognitive Skills of School Dropouts Matter in the Labor Market?," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 748-754.
  3. Katja Coneus & Johannes Gernandt & Marianne Saam, 2009. "Noncognitive Skills, School Achievements and Educational Dropout," SOEPpapers on Multidisciplinary Panel Data Research 176, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Richard J. Murnane & John B. Willett & John H. Tyler, 1999. "Who Benefits from Obtaining a GED? Evidence from High School and Beyond," NBER Working Papers 7172, National Bureau of Economic Research, Inc.
  5. Thomas S. Dee & William N. Evans & Sheila E. Murray, 1999. "Data Watch: Research Data in the Economics of Education," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 205-216, Summer.

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