DP5105 Zero Returns to Compulsory Schooling in Germany: Evidence and Interpretation

Author(s): Jörn-Steffen Pischke, Till von Wachter
Publication Date: June 2005
Keyword(s): ability bias, human capital, returns to schooling, school leaving age
JEL(s): I21, J24, J31
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5105

We estimate the impact of compulsory schooling on earnings using the changes in compulsory schooling laws for secondary schools in West German states during the period from 1948 to 1970. While our research design is very similar to studies for various other countries, we find very different estimates of the returns. Most estimates in the literature indicate returns in the range of 10-15%. We find no return to compulsory schooling in Germany in terms of higher wages. We investigate whether this is due to labour market institutions or the existence of the apprenticeship training system in Germany, but find no evidence for these explanations. We conjecture that the result might be due to the fact that the basic skills most relevant for the labour market are learned earlier in Germany than in other countries.