The long shadow of high stakes exams: Evidence from discontinuities

Working Papers 329 Hannu Karhunen, Artturi Björk

Abstract

We estimate the effect of receiving a higher grade on a high school exit exam on labor market and education outcomes. Identification comes from comparing students on   different sides of grade cutoffs. Being above a cutoff in an exam leads to (i) an increase in quality of education, but no change in years of schooling, (ii) an increase in yearly earnings that peaks between 1 and 5% at age 48, but no change in employment. At most 60% of the increase in earnings is explained by better education opportunities.

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