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Retention of High School Economics
Knowledge and the Effect of the
California State Mandate
Andrew M. Gill
a
& Chiara Gratton-Lavoie
a
a
California State University, Fullerton
Version of record first published: 07 Oct 2011.
To cite this article: Andrew M. Gill & Chiara Gratton-Lavoie (2011): Retention of High School
Economics Knowledge and the Effect of the California State Mandate, The Journal of Economic
Education, 42:4, 319-337
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THE JOURNAL OF ECONOMIC EDUCATION, 42(4), 319337, 2011
Copyright
C
Taylor & Francis Group, LLC
ISSN: 0022-0485 print/2152-4068 online
DOI: 10.1080/00220485.2011.606083
RESEARCH IN ECONOMIC EDUCATION
Retention of High School Economics Knowledge
and the Effect of the California State Mandate
Andrew M. Gill and Chiara Gratton-Lavoie
The authors extend the literature on the efcacy of high school economics instruction in two direc-
tions. First, they assess how much economic knowledge that California students acquired in their
compulsory high school course is retained on their entering college. Second, using as a control group
some college students from the state of Washington, where there is no mandate for high school eco-
nomics instruction, the authors evaluate the impact of Californias high school economics mandate on
students economic literacy when they enter college. The testing instrument is the Test of Economic
Literacy (TEL).
Keywords economic literacy, high school economics, retention
JEL code A21
Policy makers and educators are increasingly aware of the importance of economic literacy
for children, teenagers, and young adults. Public attention given to the second and third national
summits on economic and nancial literacy (National Council on Economic Education [NCEE]
2005; 2008) typies the nowwidespread recognition of the need to support and improve programs
that enhance understanding of core economic and nancial principles. Likewise, the academic
literature has long emphasized the importance of economics education in high school (see, for
example, Walstad 1992; Salemi and Siegfried 1999; Walstad and Rebeck 2000; Walstad 2001).
In 1985 the California State Legislature mandated a one-semester economics course for high
school graduation, and since then economic standards have been implemented across the entire
K12 curriculum. Currently, California is 1 of only 17 states (NCEE 2007) that require formal
economics instruction in high school. The class, typically taken in the senior high school year, is
a course on basic principles of economics. The fundamental question we address in this article is
whether the California high school economics mandate meets its objective of improving economic
literacy.
Andrew M. Gill is a professor of economics at California State University, Fullerton, and is the corresponding author
(e-mail: agill@fullerton.edu). Chiara Gratton-Lavoie is a lecturer in economics at California State University, Fullerton
(e-mail: cgratton@fullerton.edu).
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320 GILL AND GRATTON-LAVOIE
Properly assessing acquired knowledge and achieved learning objectives from any course of
study requires two important ingredients. First, it is crucial to compare the knowledge acquired
by the individuals receiving the course of study with that of a properly dened control group.
Second, knowledge assessment should include an evaluation of the degree to which information
is retained by students some time after the course of study is completed. As well articulated
by Semb and Ellis (1994, 25354), The very existence of school rests on the assumption that
people learn something of what is taught and later remember some part of it. This knowledge is
often a prerequisite for knowing when and how to perform jobs and tasks in the real world, for
making educated choices as consumers and citizens, or for taking advanced schooling. Thus, it
is important to know not only if students remember but how much and what kind of knowledge
is remembered.
Against this backdrop, we pursue our goal of evaluating the effectiveness of the California
high school economics mandate by addressing two linked research objectives. First, we assess
how much of the economic knowledge that California students acquired in their compulsory high
school course is retained on their entering college. This objective is achieved by comparing Test
of Economic Literacy (TEL) (Walstad and Rebeck 2001b) examination scores of California high
school seniors after they had completed their one-semester economics course to TEL scores of
college students who attended high school in California.
Our second research objective is to evaluate the impact of the California high school economics
mandate on the stock of economic knowledge possessed by students on entering college. To
address this research objective, we compare TEL examination scores for college students who
received high school economics instruction in California to TEL examination scores of a control
group of college students who attended high school in the state of Washington. We chose the
state of Washington because it is one of the few states in the nation that have yet to require
implementation of economic standards across the K12 curriculum, let alone requiring economics
instruction in high school (NCEE 2007).
The data set we constructed contains TEL examination scores and a set of control variables
measuring demographic and academic characteristics for students from the states of California
and Washington. The California data set covers two distinct cross-sections of students: a sample
of high school seniors from fall 2005 and a sample of college students from fall 2006. Our control
group from the state of Washington consists of a cross-section of college students from fall 2006.
We believe that our study contributes to a better understanding of the effect of the economics
mandate in high school on improving economic literacy. Even though the California mandate
requiring a one-semester course in economics has been in place since 1985, to our knowledge,
there is no empirical study to date that focuses specically on measuring how much economic
knowledge is retained by California students after completing their economics course work in
high school. Nor, to our knowledge, are there studies that attempt to assess the effectiveness of the
economics high school graduation requirement in California by comparing California students to
students completing high school in a state where economics education is not compulsory.
LITERATURE
In its 2007 Survey of the States, the NCEE presents basic statistics on K12 economic education
nationwide. The survey reports that 49 states have social studies standards that, to various degrees,
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ECONOMICS RETENTION AND STATE MANDATE 321
integrate economics into the K-12 curriculum. The survey also reports that, of these states, 41
require implementation of economics standards; 17 require the offering of an economics course,
typically in 11th or 12th grade; 17 require an economics course to be taken for high school
graduation; and 22 require testing of economics. Modest improvements in the extent of economic
education in high schools across the nation are evident when comparing the 2007 statistics with
data from 1998, when only 28 states required implementation of economics standards, 16 states
required a course offering, 13 states required passing an economics class for graduation, and 25
states required testing.
Efcacy of High School Economics Instruction and Retention of Knowledge
Evidence from the literature supports the view that having students take an economics course is
the best way to improve economic literacy (Walstad 2001). Findings in studies by Walstad and
Soper (1989), Becker and Walstad (1990), Walstad and Rebeck (2001a), and Lillydahl (1990),
for example, all support this conclusion. Walstad and Soper report that, nationwide, students
enrolled in an economics course scored higher on a TEL posttest than students enrolled in social
studies classes with no economic content, and the former scored higher than students enrolled in
classes with only some economic content. Becker and Walstad, using the same data set, found
that controlling for selection bias increased the marginal effect of taking the class on posttest
performance. Walstad and Rebeck, and Lillydahl, likewise, found that students enrolled in an
economics course obtain the highest scores on the TEL exam.
Additional evidence on the contribution of high school economics to economic literacy comes
from studies of the determinants of economic knowledge at the college level. Typically, these
studies include a dummy variable to capture the effect of high school economics on test scores
reported for college economics students. In reporting the results of their studies, some authors
(see, for example, Saunders 1970; Palmer, Carliner, and Romer 1979) refer to the coefcients
on the high school dummy variable as measuring retention, or lasting impact, of high school
economic education because some time has passed since students have last taken an economics
course.
Regarding the retention issue, the results from early studies, such as those by Saunders
(1970) and Palmer, Carliner, and Romer (1979) are mixed. Saunders found that when high
school economics does statistically matter, its lasting impact is very small and depends on the
performance measure used in the analysis. Palmer, Carliner, and Romer found that students who
did not take high school economics performed only slightly worse (by one-third of a question) on a
pretest than students who took economics in high school, while they performed slightly better than
their counterparts on the posttest. However, students who took high school economics performed
signicantly worse than the remaining portion of the class as far as overall nal course grade is
concerned.
1
Kohen and Kipps (1979) present the results of an interesting study that tries to better
formalize the depreciation of economic knowledge over time using a knowledge production
function that explicitly accounts for the number of months elapsed between the completion
of an introductory college-level economics course and the beginning of the intermediate-level
class. Although their data set is very limited (N = 49), results on the elapsed-time variable are
interesting, indicating that the stock of microeconomic information acquired in the principle
course deteriorates at a rate close to 20 percent per year.
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322 GILL AND GRATTON-LAVOIE
More-recent studies provide results about the lasting impact of high school economics that tend
to be less mixed (at least as far as impact on pretest scores is concerned). These studies also tend
to obtain coefcient estimates of the high school economics impact on college test scores that are
larger in value than those presented in earlier studies. Lopus (1997) estimated students knowledge
and performances in principles of macroeconomics and microeconomics courses using Test of
Understanding of College Economics (TUCE) examinations as pretest and posttest instruments
and controls for curriculum differences in high school instruction. She found that high school
economic instruction, with or without a microeconomic focus, leads to both higher pretest scores
and higher posttest scores in principles of microeconomics classes.
2
Williams, Waldauer, and
Duggal (1992) tested students performance in principles and intermediate-level courses offered
at one college over the period of 1988 to 1990. They found that students who took economics
in high school perform 7.71 points higher on the test they administered. Similarly, Lumsden
and Scott (1987) present evidence of a signicant positive impact of high school instruction on
students college performances in principles of economics in a large-scale United Kingdom study
that used data collected over ve years.
About the High School Economics Mandate
The obvious problem with any study investigating the effect of a high school economics mandate
on students knowledge and/or learning outcomes is the difculty in obtaining a well-dened
and suitable control group. We found only one recent study that very specically addresses the
issue of the effect of high school economics mandates on students achievements. The work
that does so is by Beleld and Levin (2004), who analyzed the effect of curriculum mandates
for economics on high school students achievement as measured by their scholastic aptitude
test (SAT) scores. Do students who have to take economics in high school score higher on their
SAT exam than students who live in states without mandates? The authors speculate that the
mandate may actually impair students SAT performances because the increase in the number of
states requiring economics has had the effect of almost doubling enrollment rates in economics
courses, while enrollments in other subject areas, such as languages and biology, have suffered.
Their theoretical argument, based on a model of utility maximization, is that a mandate to take
a specic course (economics) acts like an exogenous new constraint on students decisions. For
those pupils who would not have chosen the course otherwise, it forces a reallocation of time
and effort across their (previously optimally chosen) academic activities. Beleld and Levins
hypothesis is that, if positive at all, the impact of mandatory economics education would be
minimal and that it would be most likely negative for all the students who would not have chosen
to enroll in economics without the mandate.
Using data from the large 2001 national sample of public school SAT test-takers, and con-
trolling for student ability (GPA) and other personal and family background characteristics, the
authors (Beleld and Levin 2004) concluded that state curriculum mandates in economics reduce
students academic achievement, as measured by combined verbal and mathematics SAT scores.
Nevertheless, they also found that enrollment in economics, without controlling for the effect of
state mandates, increases SAT scores by 7.73 points for students who enrolled in a semester-long
course and by 67.78 points for students enrolled in Honors programs.
We draw two conclusions from the existing literature on knowledge retention and the effect
of high school mandates. First, a serious limitation of past studies that address the question of
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ECONOMICS RETENTION AND STATE MANDATE 323
retention of economic knowledge is that they do not compare performance in high school to
performance at the college level using the same assessment instrument. Second, we nd only
one study that explicitly addresses the issue of the effect of high school economics mandates on
students achievements, with the lack of a suitable control group being a common obstacle in the
literature. These problems are addressed in the current study, as we tackle the retention issue by
comparing high school and college students scores on the same test instrument, and we explicitly
address the mandate issue by comparing the performance of college students from California to
the performance of college students from the Washington state control group.
DATA SOURCES AND DESCRIPTIVE STATISTICS
The data set we constructed contains test results, demographic characteristics, and academic
performance characteristics for students from the states of California and Washington. The
California data cover two distinct cross-sections of students: a sample of high school seniors
and a sample of college students. Our control group from the state of Washington consists of a
cross-section of college students.
The high school sample from California was obtained in fall 2005 from economics classes
taught at the Fullerton and Capistrano school districts, both located in southern California.
Seven schools from the two school districts participated in the study, and we obtained TEL
examination scores and/or completed surveys for 1,173 students enrolled in the one-semester
mandatory economics courses offered at these schools for fall 2005.
3
The TEL examination was
administered to students prior to the start of instruction and again during the last week of the
semester. For the purposes of this study, we used scores on posttests only because these are the
scores that we need as benchmarks to measure retention and the effect of the California mandate.
Our survey instrument, used to collect demographic and student-performance characteristics, was
administered during the rst week of classes.
4
Our samples of college students were obtained in fall 2006 from California State University,
Fullerton (CSUF), Fullerton College (FC), Washington State University (WSU), and Eastern
Washington University (EWU). The California college data were obtained from sections of
principles of microeconomics taught during the fall 2006 semester. Instructors were asked to
follow written directions detailing the procedures to be used and to administer both the TEL
examination and the student survey on the rst day of class. We obtained TEL scores and/or
completed surveys for 1,026 students from the two California colleges.
Data for our control group were collected at Washington State University and Eastern Wash-
ington University, fromstudents enrolled in principles of economics courses taught during the fall
2006 semester. From these institutions, we obtained TEL examination scores and/or completed
surveys for 1,384 students. As was the case with the California college sample, instructors from
the Washington colleges were asked to followa set of detailed written directions and to administer
the TEL examination and the survey on the rst day of class.
5
Our key performance measure is a students score on the TEL. The TEL is a standardized,
nationally normed test developed by the NCEE (Walstad and Rebeck 2001b), and it is the
accepted standard for testing in studies on precollege economic literacy. The third edition of the
test consists of two forms, A and B, each with 40 multiple choice questions designed to assess
students understanding of basic core, micro, macro, and international economics concepts. Using
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324 GILL AND GRATTON-LAVOIE
the TEL scores, we constructed our measure of a students performance as the percentage of all
40 questions of the test that were answered correctly.
We collected data on demographic, family background, and academic performance character-
istics fromstudents answers to a questionnaire that we designed (available on request). Students
answers to the survey provided us with information about their race, ethnicity and gender, family
background, primary language, hours they work per week at jobs outside of school, hours per week
they devote to their studies, the educational background of their parents, and whether they took
any Honors or Advanced Placement courses in high school. For the high school sample, informa-
tion fromteachers allowed us to determine whether students were taking Honors and/or Advanced
Placement economics classes, and we obtained from ofcial school records the students aca-
demic grade point averages (GPAs) prior to the start of the fall 2005 semester. Academic GPA
summarizes students performances in all course subjects with the exclusion of physical education.
The survey for college students contained additional questions. We asked college students to
report their age, where they attended high school, whether they had previously taken college-level
classes and specically college-level economics classes, whether they had taken an Advanced
Placement or Honors economics class in high school, and their nal GPA in high school.
6
Table 1 presents descriptive statistics. We restricted the sample to include only students who
(1) provided complete data for all variables used in preliminary multivariate regression analyses,
(2) attended high school in California or Washington, (3) did not report attending high school in
multiple states, and (4) reported never taking a college-level economics class. Column 1 presents
statistics for the high school sample, and columns 2 and 3 list statistics for the samples of college
students who attended high school in California or Washington, respectively.
As shown in the table, there are some salient differences among the samples with respect
to many of the students characteristics. Regarding gender, both college samples show a larger
percentage of males than that of females, while the high school sample has a larger percentage of
females. The highest percentage of males is reported for the control group (58.7 percent). The race
and ethnicity proportions are quite different across samples, with the Washington-high-school
college sample having the largest proportion of whites (87 percent), followed by the high school
sample (67.9 percent), and the California-high-school college sample (37.4 percent). These race
and gender differences should favor the sample of college students who attended high school in
Washington, as the existing literature documents positive effects of being white and being male
on test scores.
Table 1 also shows that students in the Washington-high-school college sample are more likely
to have been born in the United States and to report English as their primary language for reading,
writing, and speaking. Students in both the high school sample and those in the Washington-
high-school college sample report larger percentages of parents who are college graduates than
do students in the California-high-school college sample. In terms of academic performance,
both college samples show a higher average GPA than did the high school sample. This is to be
expected, given that not all students in the high school sample are college-bound.
The nal portion of table 1 gives the mean TEL scores for the three samples, calculated as the
percentage of questions answered correctly on the TEL examination. As shown, the California
high school students have the highest average scores. A better performance outcome by the high
school students is not surprising, because their score measures knowledge of the subject matter in
the nal week of a semester-long economics course. Note, in contrast, that there are no signicant
differences in scores between the two college samples, without controls for other characteristics.
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ECONOMICS RETENTION AND STATE MANDATE 325
TABLE 1
Descriptive Statistics for Student Characteristics
High school College sample College sample
Demographics sample (high school in CA) (high school in WA)
Sex
Male 46.2% 52.8% 58.7%
Female 53.8 47.2 41.3
Race/ethnicity
White non-Hispanic 67.9% 37.4% 87.0%
Black non-Hispanic 1.3 3.4 2.3
Asian 5.8 20.0 3.8
Hispanic 18.4 29.3 1.8
Other race/ethnicity 6.7 10.0 5.1
Primary language for reading, writing,
and speaking
English 95.9% 94.0% 99.2%
Spanish 3.4 4.0 0.2
Southeast Asian 0.2 1.3 0.5
Other language 0.5 0.8 0.2
Family background:
Place of birth
United States 91.0% 86.7% 95.7%
Latin America 4.0 4.3 0.3
Southeast Asia 2.0 5.7 1.6
Other non-United States 3.1 3.4 2.3
Primary language spoken at home
English 88.8% 68.5% 95.8%
Spanish 9.2 25.3 2.0
Southeast Asian languages 0.7 3.8 1.3
Other language 1.3 2.5 1.0
Fathers education
Less than high school 7.9% 14.5% 2.5%
High school graduate 16.4 18.5 18.4
College but no degree 16.8 27.2 23.9
College graduate 58.8 39.8 55.3
Mothers education
Less than high school 7.2% 14.5% 2.0%
High school graduate 22.4 24.0 18.0
College but no degree 21.3 24.7 26.5
College graduate 49.1 36.8 53.6
Academic performance and work effort
GPA in high school 3.0(0.7) 3.3(0.5) 3.4(0.4)
Usual hours devoted to studies/week when in
high school
8.6(7.9) 10.0(7.8) 7.5(5.5)
Usual hours working for pay/week when in
high school
10.5(10.5) 12.0(11.4) 12.8(10.7)
Had neither Advanced Placement nor Honors
classes when in high school
34% 39% 38%
Took any college-level classes (not econ) 84% 68%
Took AP economics in high school 20.2% 9.6% 1%
Attended Fullerton College 25.3% 0%
Attended California State University, Fullerton 72.8% 0.2%
Attended Washington State University 1.5% 72.5%
Attended Eastern Washington University 0.4% 27.3%
Percent correct on TEL 64.0(19.9) 58.4(14.7) 58.3(15.1)
N 554 530 608
Note: Entries are percentages or sample means. Standard deviations are reported in parentheses.
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326 GILL AND GRATTON-LAVOIE
There are three striking differences in the students characteristics across samples that require
additional discussion, as they potentially limit the effectiveness of our analyses. The rst concern
is the large difference in primary language spoken at home between the California high school
sample and the California-high-school college sample. As shown in table 1, a much larger
percentage of the California high school sample reports that English is their primary language
spoken at home (88.8 percent versus 68.5 percent). We believe that this large difference stems
almost entirely from our inability to get cooperation from high schools in the areas in closest
proximity to California State University, Fullerton, and Fullerton College. Whereas we obtained
data from two school districts, the Fullerton and San Juan Capistrano districts, the majority of
the high school students were from the San Juan Capistrano district, located some 34 miles
south of Fullerton. This location is of concern because students from the San Juan Capistrano
district are not likely to be representative of high school students attending college in Fullerton,
particularly those students attending Fullerton College. The differences in the primary language
spoken at home certainly suggest that this could be the case. As the vast majority of the students
in our samples who attended high school in California stayed in California for college, we have
to worry about the veracity of our comparison of TEL examination scores between the high
school and college samples to assess retention of economic knowledge. As we discuss in the next
section on econometric specications, we address this concern by limiting the comparison of
TEL examination scores to only those students who reported being white. With this restriction in
place, 98.1 percent of the high school sample reports English as the primary language spoken at
home, and 97.3 percent of the California college sample report English as the primary language
spoken at home. Though the high school and college samples may differ in other characteristics,
some of which are unobserved, our focus on whites should improve our ability to say something
meaningful about retention.
A second striking difference among the samples is in the proportion of students who report
taking AP economics in high school. Among California students, 20 percent of the sample of high
school students and 10 percent of college students report taking AP economics. This difference
between the California high school students and the California college students is again likely
caused by our inability to draw from a large number of high schools in close proximity to the
Fullerton colleges. Table 1 also shows that, in sharp contrast to both California high school and
California college students, only 1 percent of Washington students report taking AP economics in
high school. The very low proportion for the Washington sample is, of course, related to the very
reason why Washington is our control group: Washington does not require economics instruction
in high school, nor does it have any economics standards across the K12 curriculum.
Our third concern is whether Washington state college students are a suitable control group
to assess the impact of the California high school mandate. The primary issue raised by the
descriptive statistics is the dramatic difference between the California and Washington college
samples regarding the percentage of students having had any noneconomics classes in college. As
shown in table 1, 84 percent of the California colleges students took at least one noneconomics
class in college, while only 68 percent of the Washington colleges sample report having previous
college experience. In fact, the data show that only 8.91 percent of the California sample report
being freshmen, while 46.33 percent of the Washington sample report being freshmen. We believe
that these discrepancies are driven by the particular characteristics of the California Master Plan
for Higher Education, which strongly promotes and facilitates easy transferring of credits across
the tiers in the California university system. Aside from the great ease of transferring from a
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ECONOMICS RETENTION AND STATE MANDATE 327
community college to a four-year university in California, students can take at any time a general
education course in a community college and feel condent that it will transfer to a four-year
university within the system. This explains why the percentage of true freshmen in our California
college sample is signicantly lower than in the Washington sample, and therefore why more
California college students report having previous exposure to college-level work. The best we
can do to take account of these differences across states is to control for college-level experience
in the regression analyses that follow.
Regarding the more general question of whether the Washington sample is an adequate control
group, despite some concerns we believe that it is. First and foremost, the state of Washington
does not require economics instruction in high school, nor does it have any economic standards
across the K12 curriculum. Additionally, both Washington State University and Eastern Wash-
ington University are state-run, public institutions, as are California State University, Fullerton,
and Fullerton College, and all are considered second- or third-tier institutions within their respec-
tive states. However, there are some differences that lead us to suspect that part of our sample
of Washington students may be better qualied, on average, than our sample of California stu-
dents. Whereas Eastern Washington University and our California colleges are not PhD-granting
institutions, Washington State University does grant PhDs. To the extent that better students are
attracted to and are accepted by PhD-granting institutions, Washington State University students
may be academically stronger, on average. For example, among entering freshmen, the average
SAT score at Washington State is 1,117 (WSU2010). The average SAT scores for California State
University, Fullerton, and Eastern Washington University are 979 and 974, respectively (CSUF
2010; EWU 2010). Fullerton College, on the other hand, according to policy for the California
Community College System, accepts transfer students and high school graduates or equivalent,
or any studentincluding non-high school graduates18 years of age or older (FC 2010).
To control for these differences among the California and Washington samples, we choose
to analyze the effects of the mandate requiring economic instruction by restricting the sample
to students who report being white, as well as by controlling for academic performance in
high school and for whether students had received any prior college-level instruction. Whereas
we certainly cannot rule out that our samples differ along additional dimensions that are
unobservable, we feel condent that we have controlled for important characteristics that would
lead to different test scores.
ECONOMETRIC SPECIFICATION
This section presents the econometric specications used to assess the retention of economic
knowledge and the effect of the California mandate requiring economics instruction in high
school. We begin with the retention issue, and specify the following linear knowledge production
function:
Test Score
i
= X
i
+
1
CSUF
i
+
2
FC
i
+
1
CSUF X
i
+
2
FC X
i
+
i
(1)
In equation (1), Test Score represents the percentage of questions answered correctly on the
TEL examination. X represents a set of control variables determining test scores (which are
detailed below). CSUF and FC are dummy variables for students who attended high school
in California and were college students at California State University, Fullerton, or Fullerton
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328 GILL AND GRATTON-LAVOIE
College, respectively, during the survey period. The reference category for these college-level
dummy variables is the group of high school seniors from California. The model also includes
a set of interaction terms between the two college dummy variables and all of the explanatory
variables in the model, as we suspect the learning mechanism to be different among high school
seniors and college students and, perhaps, between CSUF students and FC students.
Our key parameter estimates for assessing retention are the coefcients on the CSUF and FC
dummy variables (
1
and
2
) and the coefcients on the interaction terms evaluated at specied
values of the explanatory variables X
i
. For example, let a dummy variable for male be the only
explanatory variable in X
i
. The implied impact of being a college student at CSUF relative to a
high school senior is given by
1
for female students and (
1
+
1
) for male students.
We next turn to the California mandate requiring economics instruction in high school. We
address the efcacy of the mandate by comparing TEL examination scores for college students
who attended high school in California to TEL examination scores for our control group of
college students who attended high school in the state of Washington. Ideally, we would like
to carry out this analysis by comparing performances of students who attended high school in
California with those of students who attended high school in Washington separately for each of
the four colleges in our data set: California State University, Fullerton; Fullerton College; Eastern
Washington University; and Washington State University. Unfortunately data limitations preclude
this. After imposing on the sample several restrictions, which are discussed below, we observe
only 10 students who attended high school in California and went to college in Washington and
only 1 student who attended high school in Washington and went to college in California.
Given these limitations, we drop the one student who went to college in California and
high school in Washington, and we proceed to address the mandate issue with the following
econometric model:
Test Score
i
= X
i
+
1
Eastern Washington
i
+
2
Washington State
i
+
3
CSUF +
1
Eastern Washington California High School
+
2
Washington State California High School +
i
(2)
As before, X
i
is a vector of student characteristics determining test scores. Equation (2)
includes dummy variables for college attended, with the reference category for these college
dummy variables being Fullerton College in California, and interaction terms between Eastern
Washington University and whether a student attended high school in California and Washington
State and whether a student attended high school in California.
Given our data limitations and the setup of our regression model, we address the mandate
question as follows. Consider rst the coefcient on Eastern Washington (
1
). This coefcient
tells us the difference in test scores between (1) those students who attended Eastern Washington
and went to high school in Washington and (2) Fullerton College students who went to high
school in California. Whereas we believe that a nding of
1
< 0 gives strong evidence that the
California mandate improves test scores, we cannot rule out that the coefcient is picking up
school-specic effects. Stronger evidence could come from the interaction terms
1
and
2
. For
example,
1
would tell us how the effect of attending Eastern Washington relative to the reference
category Fullerton College differs for those Eastern Washington students who went to high school
in California. We would expect
1
> 0 if indeed the mandate improved performance for those
students relative to students who attended high school in Washington. Unfortunately, given the
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ECONOMICS RETENTION AND STATE MANDATE 329
small number of observations (10) we have for Washington students who went to high school in
California, we do not believe this approach will be very informative. We, therefore, present two
sets of results, one that includes these interaction terms, and one where we drop the 10 students
who attended high school in California and went to college in Washington.
Before concluding this section with a discussion of the explanatory variables included in X,
we explain three important restrictions that we imposed on the samples. We showed in the data
section that there are large differences between the samples with regard to race/ethnicity, and
between the California samples with regard to primary language spoken at home. We, therefore,
chose to estimate the parameters of equations (1) and (2) by restricting the analysis to whites.
Second, we expect students who took Honors/AP economics in high school to be different from
students who did not in ways that transcend the inclusion of a simple explanatory variable indicat-
ing the presence of that characteristic in our multiple regression frameworks. Thus, students who
took an Honors/AP economics class in high school are excluded from the analysis. Third, based
on t and F tests from preliminary regressions, we decided to drop from the analysis variables
with questionable statistical and practical signicance. These variables include measures of
family background, primary language, time spent working for pay, and study time from table 1.
The control variables we include in X in equations (1) and (2) are outlined below. Previous
studies have documented differences in students test scores by gender, typically favoring males
(Watts 1987; Walstad and Soper 1989; Heath 1989; Evans 1992; Walstad and Robson 1997;
Harris and Kerby 1997; Gratton-Lavoie and Gill 2009). We, therefore, include in the demographic
characteristics a dummy variable for males. In our specications of equations (1) and (2), we also
include variables measuring academic performance characteristics. The academic-performance
characteristics control for students existing stock of human capital and their ability. Included in
the regressions are high school GPA and a dummy variable indicating that a student had either
AP or Honors classes in high school.
7
Regarding GPA, it may be the case that high school grades
from different states are not comparable. Therefore, in carrying out the analysis of the California
mandate, we include interaction terms between college attended and GPA.
Finally, we include as a control variable in both the retention and mandate regressions a dummy
variable indicating whether a college student had ever taken any college-level classes other than
economics. As noted in the data section, this is an important consideration, especially when
comparing the California and Washington college samples. In addition, preliminary regressions
showed us that this variable was important in assessing the retention issue as well.
RESULTS
This section presents our assessment of the retention of high school economic knowledge and of
the effect of the California mandate requiring economics instruction in high school. Table 2 shows
the multivariate regression results pertaining to the retention issue. Here we compare overall TEL
examination scores for California high school students to TEL examination scores for California
college students who attended high school in California. The dependent variable is the students
percentage of correct answers on the TEL questions.
Table 3 presents the results for our assessment of the California mandate. Here we compare
TEL examination scores for college students who went to high school in California to TEL
examination scores for college students who went to high school in Washington. As for the
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330 GILL AND GRATTON-LAVOIE
TABLE 2
Multivariate Analysis of Overall TEL Examination Scores: California College Students
versus California High School Students
Explanatory variables Coefcient (SE)
Male 4.05

(2.06)
GPA 9.87

(1.87)
Took an Honors/AP class or both (not economics) 3.26 (2.25)
Fullerton College dummy 16.08

(3.80)
CSUF dummy 12.00

(4.43)
Interaction Terms
Fullerton College Male 3.93 (3.53)
Fullerton College GPA 9.77

(3.74)
Fullerton College Honors/AP (not econ) 8.94

(3.66)
Fullerton College Some college classes (not econ) 12.83

(3.81)
CSUF Male 0.167 (3.20)
CSUF GPA 10.76

(3.77)
CSUF Honors/AP (not econ) 5.98

(3.50)
CSUF Some college classes (not econ) 6.93

(3.60)
R
2
0.147
F 9.36

N 526
Note: Heteroskedasticity-robust standard errors are in parentheses. The sample is restricted to white students who did not
take a college-level economics class, and who did not take a high-school level Honors/AP economics class.

p < 0.10 (two-tail);

p < 0.05 (two-tail);

p < 0.01.
retention analysis, the dependent variable is the students percentage of correct answers on the
TEL questions.
Retention
Table 2 gives results for all white students who did not take a college-level economics class and
did not take an Honors/AP economics class in high school. To facilitate the interpretation of the
dummy variable coefcients, we replace GPA with (GPA 3.0) when GPA is interacted with
the college dummy variables. Also note that when we control for prior college experience, we
do so only through its interaction with the college dummy variables. There is no main effect to
report since high school students, forming the reference category, did not take college classes at
a university.
As shown in the rst column of table 2, white male high school students score approximately
4 percentage points higher on the TEL examination than do white female high school students.
Also, among white high school students, a one-point increase in GPA raises test scores by
9.87 percentage points. The interactions terms with male and the college dummy variables are
insignicant, indicating no signicant changes in the male advantage in test scores as we move
from the high school students to the college students. In fact, our results indicate no male
advantage in test scores for CSUF students. The implied effect of being male for these students
is 4.050.167 = 3.88 percentage points (p = 0.113). The coefcients on the interaction terms
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<
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;

p
<
0
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331
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332 GILL AND GRATTON-LAVOIE
for GPA with the college dummy variables are interesting. Both the Fullerton College and CSUF
interactions with high school GPA are negative and statistically signicant. In addition, the
implied effect of a one-point increase in high school GPA for both CSUF and Fullerton College
students is small and statistically insignicant (ps = 0.782 and 0.974, respectively).
Our main interest in table 2 is in what it tells us about retention. Turning rst to the coefcients
for the Fullerton College and CSUF dummy variables, we nd very large negative and statisti-
cally signicant coefcients for both variables. Given the setup of our interaction model, these
coefcients give the difference in test scores between female high school students and female
college students who did not take either an Honors course or an AP course in high school, and who
had not yet taken any college-level classes, evaluated at a high school GPA of 3.0. On average,
these college students score 12 percentage points lower on the TEL if they are CSUF students
and 16 percentage points lower if they are Fullerton College students. This is a very large drop
off in knowledge as students move from high school to college. The difference in college effects
between CSUF and Fullerton College of 4.08 percentage points is not statistically signicant
(p = 0.43). The ndings are little changed if we consider male students who did not take Honors
or AP classes in high school and who had not yet taken a college-level class. For male CSUF
students, the reduction in test scores compared to male high school students is still approximately
12 percentage points (12.0 0.167), and for Fullerton College students, it is 12.15 percentage
points (16.08 + 3.93).
These results suggest that a California college student in our sample who did not demonstrate
especially strong academic characteristics in high school (as suggested by lack of Honors/AP
courses in high school and a high school GPA of 3.0) and who has had no previous college
exposure (no college-level courses) experiences a quite signicant rate of loss of high school
economics knowledge.
Conclusions about retention are much different when we consider college students who have
taken Honors or AP classes in high school and who have already completed some college-level
classes. For those female CSUF students who completed at least one Honors or AP course
when in high school, the implied reduction in knowledge is 6.02 percentage points (12.0 +
5.98). However, the effect is statistically insignicant (p = 0.199). If we then consider those
female students who, in addition, completed some college-level classes, the implied reduction
in knowledge is effectively zero (0.91 percentage points = 12.0 + 5.98 + 6.93). For female
Fullerton College students who completed at least one Honors or AP course when in high school,
there is a drop in test scores of 7.14 percentage points (p =0.083) relative to high school Honors or
AP students. When we again consider those students who completed some college-level classes,
we nd an improvement in economic knowledge of 5.69 percentage points (16.08 + 8.94 +
12.83) relative to high school students who completed some Honors or AP classes, but the effect
is statistically insignicant (p = 0.117).
The results for Honors and AP students are generally encouraging from a retention point of
view because these students are those most likely to continue on to college. The rather large
effects of the variable controlling for some college-level classes seem to indicate that students
acquire some knowledge about economics from other courses in the curriculum. It also may
indicate that there is some selection bias contaminating our results. Those students who have
completed some college-level classes and are currently in a college-level class are those students
who have demonstrated to some extent that they can successfully complete college-level work.
8
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ECONOMICS RETENTION AND STATE MANDATE 333
For a nal matter, we expected to nd a smaller loss in acquired knowledge when we moved
from a sample of all white students to a restricted sample of white students who were 20 years old
or younger, simply because less time passed since the student completed the required high school
economics class. We estimated the parameters of our retention model for this younger group of
students. We learned very little from this exercise and so do not report the parameter estimates
here. The negative point estimates for the CSUF and Fullerton College dummy variables are
little changed. The only noteworthy difference is that some of the interaction terms that were
statistically signicant for the full sample are insignicant for the younger sample. The regression
results are available on request.
California Mandate
Table 3 presents the regression results for the analysis of the impact of the California mandate
(equation 2). We compare TEL examination scores for college students who went to high school
in California to TEL examination scores for college students who went to high school in Wash-
ington.
9
The reference category in this analysis is the group of students from Fullerton College
who went to high school in California. Column 1 of table 3 presents results for the case where we
include the interaction terms for the two Washington colleges with the variable indicating that the
student attended high school in California. Recall that we observed only 10 Washington college
students, distributed between the two colleges, for whom the interaction term would be equal to
1. Column 2 of the table gives the results when these 10 students are excluded from the analysis.
The rst notable nding from column 1 is that our two terms of interaction of Washington
college and California high school are individually insignicant. They are jointly insignicant,
as well (p = 0.398). The second notable feature is that excluding these 10 students leaves the
remaining parameter estimates virtually unchanged (see column 2). We therefore focus on the
results in column 2 to assess the importance of the California mandate.
As shown in column 2, students who went to high school in Washington and attended each of
the two Washington colleges scored lower on the TEL examination than the reference category
containing students who went to high school in California and attended Fullerton College. Eastern
Washington and Washington State students score, on average, 8.96 and 6.87 percentage points
lower on the TEL examination than Fullerton College students. The Washington students score
lower than the CSUF students as well. Eastern Washington students score 8.964.14 = 4.82
percentage points lower than CSUF students (p = 0.003) and Washington State students score
6.874.14 = 2.73 percentage points lower than CSUF students (p = 0.052).
If we were to interpret these results as evidence for or against the California mandate requiring
economics instruction in high school, we would come down on the side that the mandate has
small to moderate positive effects on economics knowledge for a group of college students
with no college-level economics instruction. We do realize, however, that the possibility that
our coefcients for the college dummy variables are picking up college and/or student ability
effects weakens this conclusion. It also is not clear how our conclusions would otherwise change.
If, for example, college students from Washington had higher levels of unobserved ability and
performed better on the TEL examination than California college students, regardless of high
school attended, then our current estimates of the positive effect of the mandate are probably
understated. That is, the coefcients on the Eastern Washington and Washington State dummy
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334 GILL AND GRATTON-LAVOIE
variables may be biased upward. The reverse would hold true if the Washington college students
where somehow weaker than the California students.
Several factors lead us to be optimistic that we are picking up, at a minimum, a lower bound
estimate of the effect of the mandate. First, our focus on whites and our controls for gender,
and more importantly, academic performance in high school, effectively hold constant important
characteristics of students that would lead to different test scores. Second, as mentioned earlier,
Washington students are likely better qualied on average than our sample of California students.
CONCLUSION
Using data from a sample of high school students in California and from samples of college
students in California and Washington, this work presents ndings concerning retention of high
school economic knowledge over time and the effect of the California high school mandate.
Do students retain all the information they learned in high school economics after some time
has passed? Predictably, the answer to this question is no. However, our analysis shows that the
extent of the reduction in knowledge is quite small, if at all present, for those college students
(males or females) who had taken Honors/AP courses in high school and had already taken
college-level coursework. We cannot rule out selection bias (better students go on to college)
or the possibility that a portion of our California college sample may be self-selecting into an
economics course precisely because of specic preferences towards the discipline, or, more likely,
toward the more general set of business-related disciplines. Yet, we do feel condent that we
measure retention of high school economic knowledge (or lack thereof) at least for those students
who choose to enroll in a business-oriented course of study. We note as well, however, that the
selection issues we outline probably lead us to capture a lower bound estimate on the loss of
acquired knowledge.
Does an economics mandate in high school make a difference? After control for several
students characteristics (gender, race, and high school GPA, among others), our results indicate
a moderate but statistically signicant positive effect of the California high school mandate.
Although we cannot again completely rule out the possibility of selection bias and school-specic
effects, the results we obtain show that California college students who had to take an economics
course in high school do perform better than Washington state college students who were not
exposed to economics instruction in high school. We note that our largest implied effect of the
mandate giving an 8.96 percentage point improvement in test scores compares favorably to
Williams, Waldauer, and Duggals (1992) ndings that students who took economics in high
school performed 7.71 points higher than students who did not take economics in high school on
the test those authors administered when students were in college.
As for gender, in both our analyses, in line with the existing literature, we nd that males
score higher than do females, although no signicant changes in the male advantage in test scores
appear to happen as students move on to college. Again as expected, students with higher GPAs
perform better than do those with lower GPAs. However, we also nd that academic success
in high school, as captured by high school GPA, does not affect students knowledge of basic
economics once they become college students.
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ECONOMICS RETENTION AND STATE MANDATE 335
Finally, there is evidence in the literature that shows that the effect of high school economics
(with or without a state mandate), even if positive and signicant when students start their college-
level economics course, tends to be eliminated by the end of the class (see for example, Palmer,
Carliner, and Romer 1979). In other words, some evidence exists indicating that students entering
college with no high school economics do catch up quite quickly to their colleagues who took
economics in high school. Obviously, this is not something we were able to explore with the
current data set, as we did not administer posttests to our college students at course completion.
Nevertheless, one could argue not only that the catching-up phenomenon may be expected at least
in part but also, and perhaps most importantly, that it is to some extent irrelevant as a justication
(or lack thereof) for inclusion of economics in the high school curriculum. What courses on high
school economics want primarily to achieve, like all other high school courses, is to prepare
young people for their future life as capable and productive citizens and voters, regardless of
whether they continue their formal education in college. One could indeed assert that it is for
those students who are not college-bound that the contribution of high school economics, if it
shows some lasting impact on literacy, is of the greatest social value.
NOTES
1. Neither Saunders (1970) nor Palmer, Carliner, and Romer (1979) include a control for students ages in
their analyses. The omission seems particularly relevant in the context of evaluating the lasting impact
of high school economics courses.
2. Her study focuses on curriculumdifferences in high school economics and the effect of such differences in
college principles. The results for students in principles of macroeconomics courses indicate that, while
students who took high school economics with a macroeconomic emphasis did obtain higher TUCE
pretest scores, by the end of the course they had lost their advantage. In fact, high school instruction
had no signicant impact on posttest outcomes in college macroeconomics, regardless of the curriculum
emphasis, although students who took macroeconomics in high school performed better on the posttest
than those who did not. Interestingly, score results from TEL norming samples, when separated by
question category, indicate that high school students knowledge of economics is particularly weak on
international economics, followed by low performance in macroeconomics (Walstad and Soper 1988;
Walstad and Rebeck 2001a).
3. We intended to obtain a random sample of 12th graders for our study. Specically, our intent was to
randomly select approximately 30 economics classes for the study, giving us a total sample size of
approximately 1,000 students. Apparently, our initial hopes for random sampling were rather unrealistic,
as we had a very difcult time in obtaining the cooperation of district superintendents and teachers.
Virtually all the studies done on economic education at precollege and college level suffer from similar
limitations in their sampling procedures, regardless of the size of the sample or the nancial resources
available to the researchers (see, for example, Walstad and Soper 1988 (p. 28) or Walstad and Soper
1989 (p. 24), for a discussion of similar limitations in forming the national sample for testing the second
revision of the TEL).
4. We took great pains to ensure that we obtained the most accurate information possible. We rst met with
the district superintendents to explain the project and our data needs. We then met with the teachers who
would be involved in the project. At these meetings, we explained to the teachers the goals of the project
and the instruments for the analysis, presenting them with copies of the student questionnaire, parental-
consent form, and TEL examination, and we instructed them on how we wanted the questionnaires and
tests to be administered.
5. All necessary permissions from the Institutional Review Boards were obtained and all high school
students who participated in the study provided signed parental consent forms. All participants were
assured of condentiality.
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336 GILL AND GRATTON-LAVOIE
6. It was not feasible to collect high-school-level GPA from ofcial high school records for every student
in the college samples.
7. Note that these are Honors/AP classes other than those of economics. We exclude from all analyses
students who took Honors/AP economics in high school.
8. We checked to see if our results were robust to using a fractional logit or probit model, as our dependent
variable is constrained to take on values between 0 and 100. The marginal effects fromthe fractional logit
model (giving changes in the proportion correct) are nearly identical to our ordinary least squares (OLS)
results giving changes in percentage points of correct answers. For example, the coefcient for California
State University, Fullerton, dummy variable is 12.00 in table 2, column 1. The corresponding marginal
effect from the fractional logit model is 0.121. We are very grateful to an anonymous referee both for
this suggestion and for supplying the Stata code to run the fractional logit model using Statas GLM
procedure.
9. As previously detailed, in carrying out preliminary analysis of the California mandate, we included
interaction terms between college attended and high school GPA, as it may be the case that high school
grades fromdifferent states are not comparable. Preliminary regressions results showed that interactions
between colleges and GPA were individually and jointly insignicant (p = 0.4840), so these terms are
excluded from the results shown in the table.
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