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

Author

Listed:
  • Lofstrom, Magnus

    (Public Policy Institute of California)

  • Tyler, John

    (Brown University)

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.

Suggested Citation

  • Lofstrom, Magnus & Tyler, John, 2007. "Modeling the Signaling Value of the GED with an Application to an Exogenous Passing Standard Increase in Texas," IZA Discussion Papers 2953, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2953
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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.
    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.
    3. Richard J. Murnane & John B. Willett & Kathryn Parker Boudett, 1999. "Do Male Dropouts Benefit from Obtaining a GED, Postsecondary Education, and Training?," Evaluation Review, , vol. 23(5), pages 475-503, October.
    4. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    5. Yona Rubinstein & James J. Heckman, 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.
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    Cited by:

    1. Christopher Jepsen & Peter Mueser & Kenneth Troske, 2016. "Labor Market Returns to the GED Using Regression Discontinuity Analysis," Journal of Political Economy, University of Chicago Press, vol. 124(3), pages 621-649.
    2. Paco Martorell & Damon Clark, 2010. "The Signaling Value of a High School Diploma," Working Papers 1248, Princeton University, Department of Economics, Industrial Relations Section..
    3. Lorenzo Cappellari & Paolo Castelnovo & Daniele Checchi & Marco Leonardi, 2016. "Skilled or educated? Educational reforms, human capital and earnings," DISCE - Working Papers del Dipartimento di Economia e Finanza def053, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    4. Paco Martorell & Damon Clark, 2010. "The Signaling Value of a High School Diploma," Working Papers 1248, Princeton University, Department of Economics, Industrial Relations Section..
    5. Damon Clark & Paco Martorell, 2014. "The Signaling Value of a High School Diploma," Journal of Political Economy, University of Chicago Press, vol. 122(2), pages 282-318.

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    More about this item

    Keywords

    GED; natural experiment; returns to education; signaling;
    All these keywords.

    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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