Does prior knowledge of economics and higher level mathematics improve student learning in principles of economics?

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.