Central School Exit Exams and Labor-Market Outcomes The document summarizes a study investigating the relationship between central school exit exams in Germany and labor market outcomes. It finds that individuals who obtained their school degree in a state with central exit exams earned higher wages and had lower unemployment rates compared to those from states without central exams. This was particularly true for students who entered the labor market directly after graduating. The findings suggest that central exams can improve labor market prospects by increasing student performance and the signaling value of grades to employers.

1. Central School Exit Exams
and Labor-Market Outcomes
Marc Piopiunik
Ifo Institute – Leibniz Institute for Economic Research
at the University of Munich
Santander, 1 July 2013

2. Central School Exit Exams in Germany
• Current political debate:
– Whether all 16 federal states use the same central exit exams in the most
academic school track (Gymnasium).
• This would be a huge step since the power over education policies
lies with the individual states.
• Until 2000, German states were roughly divided in half on whether
they have central exams or not.
• Today, all except one state use central exams.
– But there are still differences in intensity and how they are organized.
Marc Piopiunik 2
Central School Exit Exams and Labor-Market Outcomes

3. Our Project
• Joint project with Ludger Woessmann and Guido Schwerdt.
– Financed by the German Federal Ministry of Education and Research.
• Broader aim: Investigate central exit exams as a governance
instrument in the school system.
• Focus on relationship between central exams and labor-market
outcomes.
Marc Piopiunik 3
Central School Exit Exams and Labor-Market Outcomes

4. What Are Central Exams?
• “Curriculum-based external exit examination systems” (Bishop 1997):
1. Produce signals of student achievement that have real
consequences for the students.
2. Define achievement relative to an external standard, not relative
to other students in the classroom or school.
3. Are organized by discipline and keyed to the content of specific
course sequences.
4. Signal multiple levels of achievement in the subject, not only a
pass-fail signal.
5. Cover almost all secondary school students.
6. Assess a major portion of what students studying a subject are
expected to know.
Marc Piopiunik 4
Central School Exit Exams and Labor-Market Outcomes

5. Central Exams and Student Performance
• Why should central exams increase student performance?
– Different mechanisms ultimately rest on the observation that central
exams provide information that would otherwise not be available.
1. Increase external rewards for learning.
– Improved signaling of achievement to potential employers.
2. Decrease pressure of students against learning.
3. Change student-teacher relationship.
– Teachers turn from “judges” into “coaches”.
4. Enhance monitoring of teachers and schools.
– If results are published.
Marc Piopiunik 5
Central School Exit Exams and Labor-Market Outcomes

6. Central Exams and Student Performance:
Existing Evidence
Marc Piopiunik 6
Central School Exit Exams and Labor-Market Outcomes
• Central exit exams strongly positively associated with students’
academic performance (cf. Bishop HbEcEdu 2006).
• Cross-country studies:
– 1991 IAEP math, science, geography; 1991 IEA reading; 1995 TIMSS math, science;
1999 TIMSS-Repeat math, science; 2000 PISA reading, math, science; 2003 PISA reading, math,
science
• Cross-regional studies:
– Canadian provinces (Bishop 1995, 1997, 1999)
– U.S. states (Bishop 1995; Bishop et al. 2000, 2001)
– German states (Jürges et al. 2005, 2010; Luedemann 2011)
• Interestingly, the size of the cross-regional association between
central exams and test scores across German states is similar to the
cross-country association across OECD countries (Woessmann 2010).

7. Central Exams and Labor-Market Outcomes
• Why should central exams improve labor-market outcomes?
1. Productivity effect: Central exams may have productivity effects.
– Large literature shows that better academic skills are significantly
related to higher earnings.
2. Signaling effect: Central exams may increase information value of
grades (better comparable across schools), thereby improving
sorting of students by productivity.
Marc Piopiunik 7
Central School Exit Exams and Labor-Market Outcomes

8. Higher Information Value of
Central Exams on Labor Market
Marc Piopiunik 8
Central School Exit Exams and Labor-Market Outcomes

9. Central Exams and Labor-Market Outcomes
• Investigating impact of central exams on labor-market outcomes
requires variation of central exam regimes within countries.
• Few existing studies on labor-market effects of central exams:
– USA: Minimum competency exams are positively associated with earnings
(Bishop and Mane 2001).
• Germany provides much richer testing ground for central-exam
effects: German states are roughly divided in half about whether they
have external exit exams or not.
– Backes-Gellner and Veen (2008) find no significant association of central exams
with earnings for graduates of highest school track (Gymnasium).
Marc Piopiunik 9
Central School Exit Exams and Labor-Market Outcomes

10. Our Setting
• Exploit the fact that until recently about half of the states in
Germany used central exams.
• Compare labor-market outcomes of individuals who obtained
school degree in central exam state with individuals who obtained
school degree in non-central exam state.
– Note that since cross-state mobility is rather small and likely selective, we
do not employ state-of-residence fixed effects.
– We control for confounding factors (e.g. industry structure, other school
system characteristics), but there might still be omitted variables.
• We extend study of Backes-Gellner and Veen (2008):
1. We also consider graduates of those school tracks that generally aim for
direct entrance into the labor market since school grades might be more
important for them.
2. We also consider unemployment as potential labor-market effect. Effects
might materialize in employment if wages are rigid.
Marc Piopiunik 10
Central School Exit Exams and Labor-Market Outcomes

11. Data
• German Socio-Economic Panel (GSOEP)
– Annual household panel survey representative of the resident population
of Germany.
– Includes information on labor market outcomes and education.
• We use labor-market outcomes from 2001-2010.
• Graduate Panel of the Higher Education Information System (HIS)
– Cohort of individuals graduating from German universities in 1997.
– Labor-market outcome observed about 5 years after graduation ,i.e. in 2003.
Marc Piopiunik 11
Central School Exit Exams and Labor-Market Outcomes

12. Central Exams
by State and Secondary School Type
Marc Piopiunik 12
Central School Exit Exams and Labor-Market Outcomes

13. Central Exams and Earnings
13
Central School Exit Exams and Labor-Market Outcomes

14. Robustness Checks
• Results are similar when additionally controlling for:
– full-time employment.
– student composition in a state, i.e. shares of students attending
different school types.
– industry where individual works.
– other school system characteristics:
private school enrollment, delayed tracking, comprehensive schools,
expenditure per student, and class size.
Marc Piopiunik 14
Central School Exit Exams and Labor-Market Outcomes

15. Central Exams and Unemployment
15
Central School Exit Exams and Labor-Market Outcomes

16. Conclusion
• Existing studies indicate that central exams increase student
performance.
• We investigate long-run consequences of central exams on labor
market.
• Findings:
→ Individuals who obtained school degree in state with central
exams have higher earnings and lower unemployment.
→ In particular for students who enter the labor market directly
after graduating from school.
• Findings consistent with theoretical predictions of positive labor-
market effects of central exams.
Marc Piopiunik 16
Central School Exit Exams and Labor-Market Outcomes