Hidden Schooling: Repeated Grades and the Returns to Education and Experience

Kennedy, Kendall (2018): Hidden Schooling: Repeated Grades and the Returns to Education and Experience.

Abstract

Over the past four decades, nearly 25% of all American public school students repeated at least one grade in primary or secondary school, and ninth grade repeating increased four-fold. Despite its prevalence, few economists have attempted to account for grade repeating when estimating the returns to education and experience. I show that 10% of the increase in ninth grade repeating was caused by changes in compulsory schooling laws (CSLs). Because CSLs increase both grade repeating and educational attainment, compulsory education-based IV estimates of the returns to education are positively biased by up to 38%. Additionally, grade repeating causes endogenous measurement error in labor market experience. Solely through this measurement error, I show that the residual black-white wage gap is overstated by 10%, the wage return to a high school diploma is overstated by 11% relative to dropouts, and the labor supply gap between dropouts and high school graduates is overstated by 23%. Controlling for age instead of experience reduces this bias, suggesting age should be a standard control variable for reduced-form analysis, not experience.

• Item Type: MPRA Paper
• Language: English
• Keywords: Grade Retention, Returns to Education, Returns to Experience, 9th Grade, GED, Black-White Gaps
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I26 - Returns to Education; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials

References

Elementary/Secondary Information System. U.S. Department of Education. Institute of Education Sciences, National Center for Education Statistics.

Historical Tables & Reports: Elementary and Secondary Enrollment. U.S. Department of Education. Institute of Education Sciences, National Center for Education Statistics.

Statistical Reports: Grade Retention. Massachusetts Department of Elementary & Secondary Education, Information Services.

Acemoglu, D. and Angrist, J. (2000). How Large are Human-Capital Externalities? Evidence from Compulsory Schooling Laws. NBER macroeconomics annual, 15:9-59.

Allensworth, E. M. and Easton, J. Q. (2005). The On-Track Indicator as a Predictor of High School Graduation. Consortium on Chicago School Research, University of Chicago, Chicago, IL.

Angrist, J. D. and Krueger, A. B. (1991). Does Compulsory School Attendance Affect Schooling and Earnings? The Quarterly Journal of Economics, 106(4):979-1014.

Aragon, S. (2015). Free and Compulsory School Age Requirements. The Education Commission of the States.

Bound, J. and Freeman, R. B. (1992). What Went Wrong? The Erosion of Relative Earnings and Employment Among Young Black Men in the 1980s. The Quarterly Journal of Economics, 107(1):201-232.

Bound, J., Jaeger, D. A., and Baker, R. M. (1995). Problems with Instrumental Variables Estimation when the Correlation Between the Instruments and the Endogenous Explanatory Variable is Weak. Journal of the American statistical association, 90(430):443-450.

Bureau of Labor Statistics, U.S. Department of Labor. National Longitudinal Survey of Youth 1997 cohort, 1997-2013 (rounds 1-16). Produced by the National Opinion Research Center, the University of Chicago and distributed by the Center for Human Resource Research, The Ohio State University. Columbus, OH: 2015.

Bureau of Labor Statistics, U.S. Department of Labor, and National Institute for Child Health and Human Development. Children of the NLSY79, 1979-2014. Produced and distributed by the Center for Human Resource Research, The Ohio State University. Columbus, OH: 2015.

Cameron, A. C., Gelbach, J. B., and Miller, D. L. (2011). Robust Inference with Multiway Clustering. Journal of Business & Economic Statistics, 29(2):238-249.

Cameron, S. V. and Heckman, J. J. (1993). The Nonequivalence of High School Equivalents. Journal of labor economics, 11(1, Part 1):1-47.

Eckstein, Z. and Wolpin, K. I. (1989). Dynamic Labour Force Participation of Married Women and Endogenous Work Experience. The Review of Economic Studies, 56(3):375-390.

Haney, W., Madaus, G., Abrams, L., Wheelock, A., Miao, J., Gruia, I., and Gruia, I. (2004). The Education Pipeline in the United States, 1970-2000.

Hauser, R. M., Frederick, C. B., and Andrew, M. (2007). Grade Retention in the Age of Standards-Based Reform. Center for Demography and Ecology, University of Wisconsin.

Heubert, J. P. and Hauser, R. M. (1998). High Stakes: Testing for Tracking, Promotion, and Graduation. National Research Council Committee on Appropriate Test Use, National Academies Press.

Imbens, G. W. and Angrist, J. D. (1994). Identification and Estimation of Local Average Treatment Effects. Econometrica, 62(2):467-475.

Kena, G., Hussar, W., McFarland, J., de Brey, C., Musu-Gillette, L., Wang, X., Zhang, J., Rathbun, A., Wilkinson-Flicker, S., Diliberti, M., et al. (2016). The Condition of Education 2016. NCES 2016-144. National Center for Education Statistics.

Kreitzer, A. E., Madaus, G. F., and Haney, W. (1989). Competency Testing and Dropouts.

Lochner, L. and Moretti, E. (2004). The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports. The American Economic Review, 94(1):155-189.

Mackey, P. E. and Duncan, T. G. (2013). Does Raising the State Compulsory School Attendance Age Achieve the Intended Outcomes.

Oreopoulos, P. (2006). Estimating Average and Local Average Treatment Effects of Education when Compulsory Schooling Laws Really Matter. The American Economic Review, 96(1):152-175.

Oreopoulos, P. (2007a). Do Dropouts Drop Out Too Soon? Wealth, Health and Happiness from Compulsory Schooling. Journal of public Economics, 91(11):2213-2229.

Oreopoulos, P. (2007b). Would More Compulsory Schooling Help Disadvantaged Youth? Evidence from Recent Changes to School-Leaving Laws. In The problems of disadvantaged youth: An economic perspective, pages 85-112. University of Chicago Press.

Planty, M., Hussar, W. J., and Snyder, T. D. (2009). Condition of Education 2009. Government Printing Offce.

Sable, J., Gaviola, N., and Hoffman, L. (2007). Numbers and Rates of Public High School Dropouts: School Year 2004-05. First Look (NCES 2008-305). National Center for Education Statistics.

Shepard, L. A. and Smith, M. L. (1989). Flunking Grades: Research and Policies on Retention (New York, NY: Falmer).