Measuring the Effect of a School Reform on Educational Attainment and Earnings

During the period 1960-1971 a major reform in the comprehensive school took place in Norway. We exploit the stage implementation of the reform as an instrument in estimating the returns to schooling. The reform allows us to study identical age cohorts of individuals going through two different school systems; one with seven years (old system), and one with nine years (new system) of compulsory schooling. We analyze whether the reform lead to increased educational attainment, particularly for the disadvantaged groups that were the main target for the reform. Furthermore, we test whether the increased attainment caused by the reform lead to higher returns to education; in general and for the targeted groups. We find that the reform increases the probability of post-compulsory education for the lower educational groups, but not for the higher groups. Also the return to education varies according to educational groups. We find a substantial degree of heterogeneity in the unobserved return to education. One major finding is also that pupils from low income family background were picked up by the reform leading to positive selection into some types of education which increased the returns to education in general. In addition, we demonstrate that the results are highly dependent on our assumptions regarding heterogeneity and selection at the different stages of the model.