Cohort Changes in Educational Pathways and Returns to Education

This paper analyzes educational pathways of West German birth cohorts 1957 to 1986. We use a new data set including survey data with detailed information on educational biographies linked to administrative social security records. We find a strong expansion of higher secondary school degrees over time, which is mostly driven by changes in social-background characteristics, in particular rising parental education and a decrease in family size. Moreover, a sizeable share of those pupils that had a lower or middle secondary degree as their first degree upgrade to the next school degree, suggesting that the German education system provides ``second chances" to revise decisions made after early tracking at age 10. However, these upgraders are less likely to continue with university education, and they also tend to have lower earnings premia than students who obtained the degree on the direct path. Finally, concerning labour market returns, we find rising inequality in employment and earnings at the bottom of the education distribution, i.e. between lower and middle secondary graduates, as well as rising returns to tertiary compared to vocational education.