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Zero Returns to Compulsory Schooling in Germany: Evidence and Interpretation

  • Jörn-Steffen Pischke
  • Till von Wachter

We estimate the impact of compulsory schooling on earnings using the changes in compulsory schooling laws for secondary schools in West German states during the period from 1948 to 1970. While our research design is very similar to studies for various other countries, we find very different estimates of the returns. Most estimates in the literature indicate returns in the range of 10 to 15 percent. We find no return to compulsory schooling in Germany in terms of higher wages. We investigate whether this is due to labor market institutions or the existence of the apprenticeship training system in Germany, but find no evidence for these explanations. We conjecture that the result might be due to the fact that the basic skills most relevant for the labor market are learned earlier in Germany than in other countries.

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Paper provided by Centre for the Economics of Education, LSE in its series CEE Discussion Papers with number 0054.

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Date of creation: Jan 2006
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Handle: RePEc:cep:ceedps:0054
Contact details of provider: Web page: http://cee.lse.ac.uk/publications.htm

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  1. Pischke, Jörn-Steffen, 2003. "The Impact of Length of the School Year on Student Performance and Earnings: Evidence from the German Short School Years," IZA Discussion Papers 874, Institute for the Study of Labor (IZA).
  2. Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
  3. Sascha BECKER & Frank SIEBERN-THOMAS, 2001. "Returns to Education in Germany: A Variable Treatment Intensity Approach," Economics Working Papers ECO2001/09, European University Institute.
  4. Ichino, Andrea & Winter-Ebmer, Rudolf, 1998. "Lower and Upper Bounds of Returns to Schooling: An Exercise in IV estimation with Different Instruments," CEPR Discussion Papers 2007, C.E.P.R. Discussion Papers.
  5. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, August.
  6. Aakvik, Arild & Salvanes, Kjell G. & Vaage, Kjell, 2003. "Measuring Heterogeneity in the Returns to Education in Norway Using Educational Reforms," IZA Discussion Papers 815, Institute for the Study of Labor (IZA).
  7. Andrea Ichino & Rudolf Winter-Ebmer, 2004. "The Long-Run Educational Cost of World War II," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 57-86, January.
  8. Costas Meghir & Mårten Palme, 2005. "Educational Reform, Ability, and Family Background," American Economic Review, American Economic Association, vol. 95(1), pages 414-424, March.
  9. Philip Oreopoulos, 2003. "Do Dropouts Drop Out Too Soon? Evidence from Changes in School-Leaving Laws," Working Papers oreo-03-01, University of Toronto, Department of Economics.
  10. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December.
  11. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  12. Philip Oreopoulos, 2003. "Do Dropouts Drop Out Too Soon? International Evidence From Changes in School-Leaving Laws," NBER Working Papers 10155, National Bureau of Economic Research, Inc.
  13. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  14. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," NBER Working Papers 4483, National Bureau of Economic Research, Inc.
  15. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  16. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
  17. Daron Acemoglu & Joshua Angrist, 2001. "How Large are Human-Capital Externalities? Evidence from Compulsory-Schooling Laws," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 9-74 National Bureau of Economic Research, Inc.
  18. Oosterbeek, Hessel & Webbink, Dinand, 2007. "Wage effects of an extra year of basic vocational education," Economics of Education Review, Elsevier, vol. 26(4), pages 408-419, August.
  19. Christian Dustmann, 2004. "Parental background, secondary school track choice, and wages," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 209-230, April.
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