Does the growth in higher education mean a decline in the quality of degrees? CEPS Working Document No. 405/March 2015

In this paper the authors construct a theory about how the expansion of higher education could be associated with several factors that indicate a decline in the quality of degrees. They assume that the expansion of tertiary education takes place through three channels, and show how these channels are likely to reduce average study time, lower academic requirements and average wages, and inflate grades. First, universities have an incentive to increase their student body through public and private funding schemes beyond a level at which they can keep their academic requirements high. Second, due to skill-biased technological change, employers have an incentive to recruit staff with a higher education degree. Third, students have an incentive to acquire a college degree due to employers’ preferences for such qualifications; the university application procedures; and through the growing social value placed on education. The authors develop a parsimonious dynamic model in which a student, a college and an employer repeatedly make decisions about requirement levels, performance and wage levels. Their model shows that if i) universities have the incentive to decrease entrance requirements, ii) employers are more likely to employ staff with a higher education degree and iii) all types of students enrol in colleges, the final grade will not necessarily induce weaker students to study more to catch up with more able students. In order to re-establish a quality-guarantee mechanism, entrance requirements should be set at a higher level.

Continuous Off-the-Job Training in East Germany After Unification: Preliminary Results of an Evaluation of the Effects for Individual Workers, CES Germany & Europe Working Papers, No. 05.9, 19 July, 1995

Retraining the labor force to match the demands of a modem economy is seen as an important task during the transition process from a centrally-planned to a market economy. This need was particularly pressing in East Germany, because the transition process has proceeded much faster than in the rest of Eastern Europe. Therefore, substantial resources have been devoted to this purpose. This paper analyzes the impact of continuous off-the-job training in East Germany from the point of view of individuals who were part of the labor force before German unification in 1990. It tries to answer questions about the average gains from participating in a specific type of training. Typical outcomes considered to measure those gains are income, employment status, job security, and expected future changes in job position. The methodology used for the evaluation is the potential outcome approach to causality. This approach has received considerable attention in the statistical literature over the last fifteen years and it has recently been rediscovered by the econometric literature as well. It is adapted to allow for important permanent and transitory shocks, such as unemployment, which influence the decision to participate in the training as well as future labor market outcomes. The empirical part is based on the first four waves of the Socio-Economic Panel (GSOEP)-East (1990-1993). This panel data set has the advantage that the fourth wave contains a special survey on continuous training and that it allows keeping track of individual behavior on a monthly, respectively yearly, basis. The econometric analysis focuses on off-the-job training courses that began after unification and were completed not later than in early 1993. Although it is obviously too early to evaluate the long-term implications, the results suggest that there are no positive effects in the short run.