Students’ behavioural responses to a fallback option - Evidence from introducing interim degrees in german schools

Without a school degree, students can have difficulty in the labour market. To improve the lives of upper-secondary school dropouts, German states instituted a school reform that awarded an interim degree to high-track students upon completion of Grade 9. Using retrospective spell data on school careers from the National Educational Panel Study (NEPS), our difference-in-differences approach exploits the staggered implementation of this reform between 1965 and 1996. As intended, the reform reduced downgrading to lower school tracks. Surprisingly, it also increased successful high-track completion, arguably by reducing the perceived risk of trying longer to succeed in the high-track school.