Economic Analysis and Policy 49 (2016) 66–73 Contents lists available at ScienceDirect Economic Analysis and Policy journal homepage: www.elsevier.com/locate/eap Full length article Does prior knowledge of economics and higher level mathematics improve student learning in principles of economics? Girijasankar Mallik a,* , Sriram Shankar b a Western Sydney University, Australia b Australian National University, Australia article info Article history: Received 11 August 2015 Received in revised form 3 December 2015 Accepted 3 December 2015 Available online 8 December 2015 JEL classification: I21 I28 Keywords: Principles of economics Learning Mathematics 2SLS and GMM abstract Using the instrumental variable two stage least square (IV2SLS) and generalised method of moments (IVGMM) estimations, this paper investigates the relative importance of a wide range of variables on student performance in multiple choice and short answer questions in a first year principles of economics (PE) subject. The multi-year data set provides detailed demographic and performance characteristics of 2186 students enrolled in a major multi- campus university. Results from IVGMM and IV2SLS estimation indicate that higher levels of mathematics and economics taken prior to university are associated with significantly improved student performance in PE. Results also indicate that prior economics knowledge has more influence than prior mathematics knowledge on student performance in PE. Students with better understanding of mathematics perform significantly better in multiple choice questions. On the other hand, prior mathematics knowledge does not significantly affect the marks in short answer questions. © 2015 Published by Elsevier B.V. on behalf of Economic Society of Australia, Queensland. 1. Introduction There have been numerous studies examining the factors that influence student performance in economics subjects at university. Representative articles for Australia include Birch and Miller (2006), Mallik and Varua (2008), Mallik and Basu (2009) and Mallik and Lodewijks (2010). Some of the more useful international studies are Fizel and Fiedler (1986), Belfield and Levin (2004), Rothstein (2004), Cohn et al. (2004), Smith and Naylor (2005) and Williams et al. (1992). The performance of students in first year level university subjects has been found in previous studies to be influenced by overall achievements in final school leaving examinations (Nolan and Ahmadi-Esfahani, 2007; Birch and Miller, 2006; Camara and Echternacht, 2000) and by a number of other factors such as class attendance, method of teaching, socio- economic background and gender (Cohn and Johnson, 2006; Lassibille and Gomez, 2008; Anderson et al., 1994; Barnes et al., 2005). Quantitative skills have been especially considered as important for success in economics subjects at university. In general, knowledge and skills in mathematics has been found to enable a student to follow a logical and systematic sequence of reasoning (Schoeffler, 1956; Mallik and Varua, 2008; Mallik and Basu, 2009; Lagerlof and Seltzer, 2007; Birch and Miller, 2006; Ballard and Johnson, 2004). * Corresponding author. E-mail addresses: g.mallik@westernsydney.edu.au (G. Mallik), Sriram.Shankar@anu.edu.au (S. Shankar). http://dx.doi.org/10.1016/j.eap.2015.12.001 0313-5926/© 2015 Published by Elsevier B.V. on behalf of Economic Society of Australia, Queensland.