Posted Content•
The causal effect of education on earnings
TL;DR: This paper surveys the recent literature on the causal relationship between education and earnings and concludes that the average (or average marginal) return to education is not much below the estimate that emerges from a standard human capital earnings function fit by OLS.
Abstract: This paper surveys the recent literature on the causal relationship between education and earnings. I focus on four areas of work: theoretical and econometric advances in modelling the causal effect of education in the presence of heterogeneous returns to schooling; recent studies that use institutional aspects of the education system to form instrumental variables estimates of the return to schooling; recent studies of the earnings and schooling of twins; and recent attempts to explicitly model sources of heterogeneity in the returns to education. Consistent with earlier surveys of the literature, I conclude that the average (or average marginal) return to education is not much below the estimate that emerges from a standard human capital earnings function fit by OLS. Evidence from the latest studies of identical twins suggests a small upward "ability" bias -- on the order of 10%. A consistent finding among studies using instrumental variables based on institutional changes in the education system is that the estimated returns to schooling are 20-40% above the corresponding OLS estimates. Part of the explanation for this finding may be that marginal returns to schooling for certain subgroups -- particularly relatively disadvantaged groups with low education outcomes -- are higher than the average marginal returns to education in the population as a whole.
Citations
More filters
TL;DR: In this paper, the authors present new evidence on the social returns to education within a macroeconomic growth regression framework using improved schooling data and a macro version of the Mincer relationship between education and wages for individual workers.
Abstract: This paper presents new evidence on the social returns to education within a macroeconomic growth regression framework. I use improved schooling data and a macro version of the Mincer relationship between education and wages for individual workers. The results suggest that an increase by one year of the average education level of the labor force would increase labor productivity by 7–10% in the short run and by 11–15% in the long run. Some evidence is found for the presence of dynamic human capital spillovers: the human capital stock increases prospective economic growth. The empirical results are used to quantify the macroeconomic impact of skill upgrading as agreed upon in the European Union’s Lisbon strategy for growth and jobs. Finally, the paper discusses discrepancies between private and social returns to education.
51 citations
TL;DR: Evidence that extending health insurance to young adults raises their wages is found using American Community Survey and Census data to suggest the Affordable Care Act will lead to wage increases for young adults.
51 citations
TL;DR: This paper develops robust models for estimating and interpreting treatment effects arising from both ordered and unordered multistage decision problems, and decomposes the IV estimator, showing that IV generally does not estimate economically interpretable or policy relevant parameters in prototypical dynamic discrete choice models, unless policy variables are instruments.
51 citations
Book•
01 Jan 2006
TL;DR: In this article, Burtless et al. analyzed the past experience with various growth policies and proposed several reforms and new initiatives in labor, education, entrepreneurship, fiscal policy, migration, trade, and financing development, which they incorporated into a proposed strategy for jumpstarting Puerto Rican economic growth.
Abstract: A non-incorporated territory of the United States, Puerto Rico operates under US legal, monetary, security and tariff systems Despite sharing in these and other key US institutions, Puerto Rico has experienced economic stagnation and large scale unemployment since the 1970s The island's living standards are low by US standards, with a per capita income only half that of Mississippi, the poorest state While many studies have analyzed the fiscal implications of Puerto Rico's political relationship with the United States, little research has focused broadly on the island's economic experience or assessed its growth prospects In this innovative new book, economists from US and Puerto Rican institutions address a range of major policy issues affecting the island's economic development To frame the current situation, the contributors begin by assessing Puerto Rico's past experience with various growth policies They then analyze several reforms and new initiatives in labor, education, entrepreneurship, fiscal policy, migration, trade, and financing development, which they incorporate into a proposed strategy for jumpstarting Puerto Rican economic growth Contributors include Gary Burtless (Brookings Institution); Orlando Sotomayor, Luis Rivera-Batiz, Ramon Cao, Maria Enchautegui, Jose Joaquin Villamil, Eileen Segarra, Marines Aponte, and Juan Lara (University of Puerto Rico); Richard Freeman and Robert Lawrence (Harvard University); Helen Ladd (Duke University); Francisco Rivera-Batiz (Columbia University); Steven Davis and Bruce Meyer (University of Chicago); James Alm (Georgia State University); Ingo Walter, Rita Maldonado-Bear, and William Baumol (New York University); Belinda Reyes (University of California, Merced); Alan Krueger (Princeton University); Carlos Santiago (University of Wisconsin); David Audretsch (Indiana University); Ronald Fisher (Michigan State University); Fuat Andic (UN Advisor); Arturo Estrella (NY Federal Reserve); James Hanson and Daniel Lederman (World Bank); James Dietz (University of California, Fullerton); and Katherine Terrell (University of Michigan)
51 citations
TL;DR: In this paper, the authors evaluate the labour market value of basic skills in the UK, focusing on the wage and employment returns to having better literacy and numeracy skills, and assess whether the value of these skills has increased over time, using a cross cohort analysis based on the 1958 National Child Development Study cohort and the 1970 British Cohort Study.
Abstract: In this paper we evaluate the labour market value of basic skills in the UK, focusing on the wage and employment returns to having better literacy and numeracy skills. We draw on literacy and numeracy assessments undertaken by all cohort members of the UK 1970 British Cohort Study. The data used are very rich and allow us to account for potential ability bias, including as they do early childhood assessments of ability. We find that the literacy and numeracy effects on earnings are over and above any general effect on earnings from a person being more cognitively able. We also assess whether the value of basic skills, in terms of wage returns, has increased over time, using a cross cohort analysis based on the 1958 National Child Development Study cohort and the 1970 British Cohort Study. Our results show that literacy and numeracy skills retained their high value in the labour market over the period 1995-2004, despite numerous policy attempts to increase the supply of basic skills during this period.
51 citations