Professor of Economics, University of Munich; Head of Department of Human Capital and Innovation, Ifo Institute
The central vs. local nature of exit exam systems at the end of high school can have important repercussions on the labor market. By increasing the informational content of grades, central exams may improve the sorting of students by productivity. To test this, we exploit the unique German setting where students from states with and without central exams work on the same labor market. Our difference-in-difference model estimates whether the earnings difference between high and low grades differs between central and local exams. We find that the earnings premium for high-school leaving grades is indeed larger when obtained on central exams. Choices of higher-education programs and of occupations do not appear major channels of this result.