PISA: What makes the difference?

The large difference in the level and variance of student performance in the 2000 PISA study between Finland and Germany motivates this paper. It analyses why Finnish students showed a significantly higher performance by estimating educational production functions for both countries, using a unique micro-level dataset with imputed data and added school type information. The difference in reading proficiency scores is assigned to different effects, using Oaxaca–Blinder and Juhn–Murphy–Pierce decomposition methods. The analysis shows that German students and schools have on average more favorable characteristics except for the lowest deciles, but experience much lower returns to these characteristics in terms of test scores than Finnish students. The role of school types remains ambiguous. Overall, the observable characteristics explain more of the variation in test scores in Germany than in Finland.