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Measuring the Returns to the GED: Using an Exogenous Change in GED Passing Standards as a Natural Experiment

  • Lofstrom, Magnus


    (Public Policy Institute of California)

  • Tyler, John


    (Brown University)

In this paper, we exploit an exogenous change in the passing standard required to obtain a General Educational Development (GED) credential to identify the impact of the GED on the quarterly earnings of male dropouts, utilizing the Texas Schools Micro Data Panel (TSMP). These unique data 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 effect” on earnings. The finding of no significant difference in pre-test taking earnings between the treatment and control group support the validity of the natural experiment. Our results are robust to a number of specifications and sub-samples of our general sample population of 16-40 year old males.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1306.

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Length: 51 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1306
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  1. Stephen V. Cameron & James J. Heckman, 1991. "The Nonequivalence of High School Equivalents," NBER Working Papers 3804, National Bureau of Economic Research, Inc.
  2. John H. Tyler & Richard J. Murnane & John B. Willett, 2000. "Estimating The Labor Market Signaling Value Of The GED," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 431-468, May.
  3. 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.
  4. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
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