The Long Run Human Capital and Economic Consequences of High-Stakes Examinations

Victor Lavy, Avraham Ebenstein and Sefi Roth

No 20647, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Cognitive performance during high-stakes exams can be affected by random disturbances that, even if transitory, may have permanent consequences for long-term schooling attainment and labor market outcomes. We evaluate this hypothesis among Israeli high school students who took a series of high stakes matriculation exams between 2000 and 2002. As a source of random (transitory) shocks to high- stakes matriculation test scores, we use exposure to ambient air pollution during the day of the exam. First, we document a significant and negative relationship between average PM2.5 exposure during exams and student composite scores, post-secondary educational attainment, and earnings during adulthood. Second, using PM2.5 as an instrument, we estimate a large economic return to each point on the exam and each additional year of post-secondary education. Third, we examine the return to exam scores and schooling across sub-populations, and find the largest effects among boys, better students, and children from higher socio-economic backgrounds. The results suggest that random disturbances during high-stakes examinations can have long-term consequences for schooling and labor market outcomes, while also highlighting the drawbacks of using high-stakes examinations in university admissions.

JEL-codes: I21 I26 J24 (search for similar items in EconPapers)
Date: 2014-10
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Published as Ebenstein, Avraham, Victor Lavy, and Sefi Roth. 2016. "The Long-Run Economic Consequences of High-Stakes Examinations: Evidence from Transitory Variation in Pollution." American Economic Journal: Applied Economics, 8 (4): 36-65. DOI: 10.1257/app.20150213

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Working Paper: The Long Run Human Capital and Economic Consequences of High-Stakes Examinations (2014)
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