Central school-leaving exams, signaling effects of grades and labor-market outcomes in Germany

The positive association between central exams and student achievement is well documented, but little is known about the long-term effects of central exams on labor market outcomes. This study exploits variation in exam systems across German states and educational tracks to investigate potential long-term effects of central exams on labor market earnings and unemployment probabilities. Results show that central exams are associated with higher earnings among pupils from the lowest educational track and with lower unemployment among pupils from the lowest and highest educational tracks. We also show that the association between earnings and exam grades is higher when grades are obtained in central exams, which should increase students' incentives to study in states with central exams. In summary, we provide first evidence that central exams may have long-term impacts on the labor market.