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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.
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TL;DR: In this article, the relationship between wages and education at a European level, using a quantile regression in order to be able to extend the study along the whole wage distribution, is analyzed.
Abstract: This paper seeks to analyse the relationship between wages and education at a European level, using a quantile regression in order to be able to extend the study along the whole wage distribution. This analysis is carried out for a sample of 14 European countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and the United Kingdom), using the European Community Household Panel data‐set. The paper aims to investigate whether the relationship between wages and education at European level is homogeneous and stable through time by running regressions for average and current (log)wages. Policy implications are derived.
34 citations
TL;DR: The authors explored the importance and feasibility of adding retrospective questions about actual work experience to cross-sectional data sets and demonstrated that having such actual experience data is important for analyzing women's postschool human capital accumulation, residual wage inequality, and the gender pay gap.
Abstract: We use Michigan Panel Study of Income Dynamics data and data from a 2008 telephone survey of adults conducted by Westat for the Princeton Data Improvement Initiative (PDII) to explore the importance and feasibility of adding retrospective questions about actual work experience to cross-sectional data sets. We demonstrate that having such actual experience data is important for analyzing women’s postschool human capital accumulation, residual wage inequality, and the gender pay gap. Further, our PDII survey results show that it is feasible to collect actual experience data in cross-sectional telephone surveys like the March Current Population Survey’s annual supplement.
34 citations
TL;DR: For example, this article found that on-the-job training has a large positive effect on wages for employees in Sweden and employees in jobs that require long on-to-off training earn significantly more than workers in jobs with short training requirements.
Abstract: On‐the‐job training has a large positive effect on wages for employees in Sweden, and employees in jobs that require long on‐the‐job training earn significantly more than workers in jobs with short training requirements. The effects of training are large for recently hired and low for senior employees. There are significant wage effects of general and specific on‐the‐job training, and the effect is significantly larger for general training. Separate estimates for the public and private sectors show significant effects of specific training only for public‐sector employees and large effects of general training for private‐sector employees. The results suggest that the distinction between general and specific training matters, that firms are willing to pay for general training and that there is heterogeneity in the returns to these forms of training.
34 citations
TL;DR: In this paper, the authors highlight four major differences between Buenos Aires and Chicago in 1914 and show that despite their initial similarities, Chicago was vastly more prosperous for most of the twentieth century.
Abstract: Buenos Aires and Chicago grew during the nineteenth century for remarkably similar reasons. Both cities were conduits for moving meat and grain from fertile hinterlands to eastern markets. However, despite their initial similarities, Chicago was vastly more prosperous for most of the twentieth century. Can the differences between the cities after 1930 be explained by differences in the cities before that date? We highlight four major differences between Buenos Aires and Chicago in 1914. Chicago was slightly richer, and significantly better educated. Chicago was more industrially developed, with about 2.25 times more capital per worker. Finally, Chicago’s political situation was far more stable and it was not a political capital. Human capital seems to explain the lion’s share of the divergent path of the two cities and their countries, both because of its direct effect and because of the connection between education and political instability.
34 citations
TL;DR: This paper investigated the differential effect of mandatory seat belt laws on seat belt use among socioeconomic subgroups and found that the effect of such laws is larger for those with fewer years of education.
Abstract: We investigated the differential effect of mandatory seat belt laws on seat belt use among socioeconomic subgroups. We identified the differential effect of legislation across higher versus lower education individuals using a difference-in-differences model based on state variations in the timing of the passage of laws. We find strong effects of mandatory seat belt laws for all education groups, but the effect is stronger for those with fewer years of education. In addition, we find that the differential effect by education is larger for mandatory seat belt laws with primary rather than secondary enforcement. Our results imply that existing socioeconomic differences in seat belt use would be further mitigated if all states upgraded to primary enforcement. Language: en
34 citations