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Hidden Schooling: Repeated Grades and the Returns to Education and Experience

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  • Kennedy, Kendall

Abstract

Over the past four decades, nearly 25% of all American public school students repeated at least one grade in primary or secondary school, and ninth grade repeating increased four-fold. Despite its prevalence, few economists have attempted to account for grade repeating when estimating the returns to education and experience. I show that 10% of the increase in ninth grade repeating was caused by changes in compulsory schooling laws (CSLs). Because CSLs increase both grade repeating and educational attainment, compulsory education-based IV estimates of the returns to education are positively biased by up to 38%. Additionally, grade repeating causes endogenous measurement error in labor market experience. Solely through this measurement error, I show that the residual black-white wage gap is overstated by 10%, the wage return to a high school diploma is overstated by 11% relative to dropouts, and the labor supply gap between dropouts and high school graduates is overstated by 23%. Controlling for age instead of experience reduces this bias, suggesting age should be a standard control variable for reduced-form analysis, not experience.

Suggested Citation

  • Kennedy, Kendall, 2018. "Hidden Schooling: Repeated Grades and the Returns to Education and Experience," MPRA Paper 90454, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:90454
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    References listed on IDEAS

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    More about this item

    Keywords

    Grade Retention; Returns to Education; Returns to Experience; 9th Grade; GED; Black-White Gaps;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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