Econometric Analysis of Educational Decisions and their Consequences

Abstract

This doctoral thesis is concerned with the econometric analysis of educational decisions and their consequences on economic outcomes for the complex multiple stage German education system. Of particular importance is the role of early tracking on subsequent transitions and on later expected outcomes. Another major aspect we are interested in relates to the availability of `second chance' options and whether they are able to reduce socio-economic inequalities. We also highlight the importance of controlling for previous transitions in order to measure the effect of parental background at a certain node net of its influence at earlier points.

There are several important aspects inferred from this thesis. First, the results add to the litera-ture on the importance of individual background on attained levels of education. Our main con-tribution consists in establishing that this background determines, to a certain extent, education decisions over the entire life-cycle. Second, the availability of `second chance' options benefits individuals with better socio-economic status and it does not seem to fulfill the purpose of reducing social inequalities, but rather serving the purpose of preserving parental status. Third, higher levels of educational attainment lead to higher expected wages. The element of novelty in our study is that returns to tracks not only include direct returns, but also the value of continuation options opened up by choosing those tracks. This offers a more complete picture of differences in expected returns between tracks. Fourth, vocational and academic degrees differ significantly in terms of wage returns even after accounting for self-selection and using different instruments for dealing with the endogeneity of education leads to different estimation results. Finally, this thesis uses modern and relatively new microeconometric methods which allow us to properly account for unobserved individual characteristics and self-selection into tracks, and to circumvent the problems raised by lack of data regarding ability, motivation or intelligence.

To conclude, this empirical work achieved its goal of deepening the analysis of the German education system by considering most of its stages and tracks in a simultaneous way. On the one hand, results confirm the literature findings, and on the other hand, they offer important new insights regarding decisions determinants and consequences on economic outcomes. Such analysis could be used in order to improve equality of opportunities and it could be ap-plied to any other education system of the world. Moreover, with the availability of better data, some additional aspects could be investigated such as the formation of cognitive and non-cognitive skills over the life-cycle. Fortunately, in recent years there has been a trend of in-creasing the quality of education related data, so such research will soon be feasible.