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Accounting for Heterogeneous Returns in Sequential Schooling Decisions

Gema Zamarro
- 01 Mar 2006 - 
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In this paper, a method for estimating returns to schooling that takes into account that returns may be heterogeneous among agents and that educational decisions are made sequentially is presented, where the variation of supply-side instruments over time will emerge as a source of identification of the desired parameters.
Abstract: 
This paper presents a method for estimating returns to schooling that takes into account that returns may be heterogeneous among agents and that educational decisions are made sequentially. A sequential decision model is interesting because it explicitly considers that the level of education of each individual is the result of previous schooling choices and so, the variation of supply-side instruments over time will emerge as a source of identification of the desired parameters. A test for heterogeneity in returns from sequential schooling decisions is developed and expressions for Marginal Treatment Effects are obtained in this context. Returns are estimated and tested from cross-sectional data from a Spanish household survey that contains rich family background information and useful instruments. This data is stratified by level of education and so estimators are adapted to take this feature into account. Finally, this methodology is used to analyze possible effects of the 1970 reform of the Spanish education system.

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Tilburg University
Accounting for Heterogeneous Returns in Sequential Schooling Decisions
Zamarro, G.
Publication date:
2006
Link to publication in Tilburg University Research Portal
Citation for published version (APA):
Zamarro, G. (2006).
Accounting for Heterogeneous Returns in Sequential Schooling Decisions
. (CentER
Discussion Paper; Vol. 2006-21). Econometrics.
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Download date: 09. aug.. 2022
No. 2006–21
ACCOUNTING FOR HETEROGENEOUS RETURNS IN
SEQUENTIAL SCHOOLING DECISIONS
By Gemma Zamarro
March 2006
ISSN 0924-7815
Accounting for Heterogeneous Returns in
Sequential Schooling Decisions
Gema Zamarro
1
Tilburg University
March 17, 2006
1
Special thanks to Manuel Arellano for his advice, remarks and comments. I
would like to thank Pedro Jes´us Hern´andez for providing me with the data set
and for his help when needed. I am grateful to James J. Heckman for accepting
me as a visiting student at the University of Chicago from January to May 2004,
for making me feel part of his workgroup and for discussions that were essential
for the development of this paper. My thanks are also due to Samuel Bentolila,
Pedro Mira and Salvador Navarro for their suggestions and time. I acknowledge
the comments and support of Aitor Lacuesta, Jes´us Carro, St´ephane Bonhomme,
Viswa Velur and all my Ph.D. colleagues. Finally, this paper has also benefited
from comments of participants at the following colloquia, meetings and workshops:
CEMFI Ph.D. workshop; Heckman’s workgroup seminar, Chicago 2004; COST
conference, Amsterdam 2004; European Winter Meeting of the Econometric Soci-
ety, Stockholm 2004; FEDEA seminar, Madrid 2004; XXIX Simposio de An´alisis
Econ´omico, Pamplona 2004; PEW day Conference, Madrid 2005; World Congress
of the Econometric Society, London 2005; Scientific Meeting of Fundacion Ra-
mon Areces, Madrid 2005; Econometric Evaluation of Public Policies: Methods
and Applications, Paris 2005; Workshop on Policy Evaluation, Seville 2005. Er-
rors, if any, are mine. Address for correspondence: Tilburg University, P.O. Box
90153, NL-5000 LE Tilburg, The Netherlands. Phone: (+31) 134663219. Email:
G.Zamarro@uvt.nl
Abstract
This paper presents a method for estimating returns to schooling that takes
into account that returns may be heterogeneous among agents and that edu-
cational decisions are made sequentially. A sequential decision model is in-
teresting because it explicitly considers that the level of education of each
individual is the result of previous schooling choices and so, the variation of
supply-side instruments over time will emerge as a source of identification
of the desired parameters. A test for heterogeneity in returns from sequen-
tial schooling decisions is developed and expressions for Marginal Treatment
Effects are obtained in this context. Returns are estimated and tested from
cross-sectional data from a Spanish household survey that contains rich fam-
ily background information and useful instruments. This data is stratified
by level of education and so estimators are adapted to take this feature into
account. Finally, this methodology is used to analyze possible effects of the
1970 reform of the Spanish education system.
JEL Classification: I21, I28, C10, J31. Keywords: Schooling, Selection
Models, Heterogeneity, Sequential decisions, Policy Evaluation.
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ReportDOI

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TL;DR: In this article, the authors present a dynamic model of banking supervision to analyze the impact of each of Basell II three pillars on banks' risk taking, concluding that all three Pillars reduce banks? risk taking incentives.
Book ChapterDOI

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Joan Llull, +1 more
TL;DR: Llull et al. as discussed by the authors presented a cross-country analysis of the impact of immigration on productivity and employment, finding that a 1 percentage point increase in the share of immigrants in the population reduces GDP per capita by 2%, the employment rate by 0.89 percentage points, and average hours worked conditional on working by 1.28%.
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This paper presents a method for estimating returns to schooling that takes into account that returns may be heterogeneous among agents and that educational decisions are made sequentially.