Association for Public Policy Analysis & Management

We employ a regression discontinuity design to estimate whether a high school diploma raises productivity (human capital theory) or simply reflect it (sorting theory). For this purpose, we exploit standardized exams students must take at the end of the final year of secondary education to obtain a high school diploma in the Netherlands. Using an administrative dataset, we compare the earnings of workers who barely passed and barely failed standardized exit exams. At first sight, our results suggest that there is no earnings effect of a high school diploma. However, this is because most students who passed the exams actually enrolled in postsecondary education. Once we focus on students who immediately entered the labor market, we find a positive effect of a high school diploma on earnings of about 0.35 EUR per hour. Although this effect remains positive regardless of the gender, ethnicity, or track, we find a larger positive effect for boys and workers who have completed pre-university education. Therefore, we conclude that a high school diploma is likely to have a positive effect on earnings. We contemplate that this effect can be interpreted as a diploma sorting effect.