The Long-Run Economic Consequences of High-Stakes Examinations: Evidence from Transitory Variation in Pollution

Cognitive performance during high-stakes exams can be affected by random disturbances that, even if transitory, may have permanent consequences. We evaluate this hypothesis among Israeli students who took a series of matriculation exams between 2000 and 2002. Exploiting variation across the same student taking multiple exams, we find that transitory PM_2.5 exposure is associated with a significant decline in student performance. We then examine these students in 2010 and find that PM_2.5 exposure during exams is negatively associated with postsecondary educational attainment and earnings. The results highlight how reliance on noisy signals of student quality can lead to allocative inefficiency.

Ebenstein, Avraham, Victor Lavy, and Sefi Roth. 2016. “The Long-Run Economic Consequences of High-Stakes Examinations: Evidence from Transitory Variation in Pollution.” American Economic Journal: Applied Economics 8 (4): 36–65.DOI: 10.1257/app.20150213