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

Brown University and NBER
Research in Labor Economics 08/2007; 28. DOI: 10.1016/S0147-9121(08)28010-6
Source: RePEc


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.

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Available from: Magnus Lofstrom, Jun 02, 2015
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    • "One simple alternative is to limit consideration to the cases in which individuals have not taken the test a second time. As noted above, Lofstrom and Tyler (2007) limit their sample in this way as a robustness check for their signaling model, apparently under the assumption that this group would not suffer from the same bias. Figure 2 presents the distribution of scores for individuals who took the test in the period 1995-2005 and did not take the test a second time through 2008. "
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    ABSTRACT: In this paper, we evaluate the labor-market returns to General Educational Development (GED) certification using Missouri administrative data. We develop a fuzzy regression discontinuity (FRD) method to account for the reality that GED test takers can repeatedly retake the test until they pass it. Our technique can be applied to other situations where program participation is determined by a score on a "retake-able" test. Previous regression discontinuity estimates of the returns to GED certification have not accounted for retaking behavior, so these estimates may be biased. We find that the effect of GED certification on either employment or earnings is not statistically significant. GED certification increases postsecondary participation by up to four percentage points for men and up to eight percentage points for women.
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    • "Another interesting comparison is between our estimates and the findings of several studies that use innovative empirical strategies to estimate the GED premium. Some of these estimates suggest effects as high as 20 percent (Tyler, Murnane and Willett, 2000, Tyler, 2004) and some suggest no effects (Lofstrum and Tyler, 2007). As we discuss in more detail below, it may be that some of the methods used in the GED literature do not generate equal-productivity comparisons. "
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    ABSTRACT: The most direct way to test whether employers use education as a signal of unobserved productivity is to test whether firms statistically dis- criminate in favor of more-educated workers. Previously-used versions of these tests suggest that they do. In particular, many studies have shown that workers who hold educational credentials such as a GED, high school diploma, or college degree earn more than uncredentialed workers that have completed the same amount of schooling. Yet if credentialed workers are more productive than uncredentialed workers, and if employ- ers have productivity information that is unobserved by the researcher, these estimates will be biased. This paper presents new evidence on the role of education-based signaling using quasi-experimental variation in the likelihood of earning a high school diploma, the most commonly-held education credential in the U.S. Specifically, we use a regression disconti- nuity approach based on a comparison of individuals who barely pass and barely fail high school exit exams, tests that students must pass in order to earn a high school diploma. Using administrative data on education and earnings from the states of Texas and Florida, we estimate that the high school diploma premium is less than 5 percent, around one quarter of the size of previous estimates. We examine several possible threats to our conclusions, notably the possibility that receipt of a high school degree affects "downstream" outcomes such as postsecondary schooling, and conclude that these do not undermine our central conclusions. Our analysis suggests that the signaling role of education may be smaller than was previously thought.
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    ABSTRACT: This paper discusses (a) the role of cognitive and noncognitive ability in shaping adult outcomes, (b) the early emergence of differentials in abilities between children of advantaged families and children of disadvantaged families, (c) the role of families in creating these abilities, (d) adverse trends in American families, and (e) the effectiveness of early interventions in offsetting these trends. Practical issues in the design and implementation of early childhood programs are discussed (JEL A12).
    Economic Inquiry 06/2008; 46(3):289. DOI:10.1111/j.1465-7295.2008.00163.x · 0.98 Impact Factor