Estimating the BenefiÂ…t of High School for College-Bound Students

Studies based on instrumental variable techniques suggest that the value of a high school education is large for potential dropouts, yet we know much less about the size of the benefi t for students who will go on to post-secondary education. To help fill this gap, I measure the value-added of a year of high-school mathematics for university-bound students using a recent Ontario secondary school reform. The subject speci ficity of this reform makes it possible to identify the benefi t of an extra year of mathematics despite the presence of self-selection: one can use subjects unaffected by the reform to control for potential ability differences between control and treatment groups. Further, the richness of the data allows me to generalize the standard difference-in-differences estimator, correcting for heterogeneity in ability measurement across subjects. The estimated value- added to an extra year of mathematics is small for these students –of the order of 17 percent of a standard deviation in university grades. This evidence helps to explain why the literature fi nds only modest effects of taking more mathematics in high school on wages, the small monetary gain being due to a lack of subject-speci c human capital accumulation. Within- and between-sample comparisons also suggest that the extra year of mathematics benefi ts lower-ability students more than higher-ability students.