Nicole Schneeweis

In the Austrian (as well as the German) education system students have to choose between different educational tracks at the age of 10. We argue that early tracking creates inefficiencies because the earlier the track choice has to be made, the more it is influenced by factors other than innate ability. Recent evidence suggests that the relative age of a student within a grade is related to his or her achievement, and that this effect fades with the duration of schooling. However, if students are separated into different educational tracks early in their schooling career, relative age effects may be preserved or even reinforced through differences in the rate of human capital accumulation between tracks. In this paper we estimate the effect of relative age on track choice using register data for a major Austrian city for the period 1984-2006 and survey data from PISA 2003 and 2006. Since age at track choice is endogenous, we exploit the exogenous variation in birth month to identify the causal effect of relative age. We find a strong and significant positive effect of relative age on track choice in grades 5-8. We also look beyond grade 8, where students again have to choose between different educational tracks. We find a persistent age effect for students in urban areas and students from low parental background and conclude that the education system fails to provide a mechanism that leads to an efficient allocation of students to tracks.