I estimate a dynamic model of educational decisions that allows for observed and unobserved differences in initial ability. Each year students choose their level of effort by deciding over the academic level of their study program and the likelihood of end-of-year performance. Good performance is costly, but necessary to continue in the program. This replaces traditional approaches, which assume performance follows an exogenous law of motion. I use the model to investigate high school tracking policies and obtain the following results: (1) encouraging underperforming students to switch to less academic programs substantially reduces grade retention and dropout, (2) the resulting decrease in the number of college graduates is small and insignicant, and (3) a model that assumes performance is exogenous ignores a change in unobserved study effort, leading to large biases and falsely concluding there would be an important negative impact on graduation rates in higher education.
high school curriculum; early tracking; dynamic discrete choice; CCP estimation;
- C61: Optimization Techniques • Programming Models • Dynamic Analysis
- I28: Government Policy
TSE Working Paper, n. 19-1002, March 2019