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The causal effect of education on earnings

01 Jan 1999-Handbook of Labor Economics (Elsevier)-pp 1801-1863
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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Journal ArticleDOI
TL;DR: This article found that the institutional set-up of the education system and the degree of coordination prevailing in a given economy both have a distinct impact on micro-level associations between educational background and preferences for different kinds of education on the micro level.
Abstract: Integrating the literature on the varieties of capitalism with sociological studies of educational stratification, this paper argues that macro-level institutions significantly shape the relationship between educational background and preferences for different kinds of education on the micro level. In particular, [the authors] find that the institutional set-up of the education system and the degree of coordination prevailing in a given economy both have a distinct impact on micro-level associations. Segregated education systems dominated by vocational training at the secondary level increase the strength of the association between educational background and preferences, whereas higher levels of coordination weaken this relationship. [The authors'] claims are supported by an empirical analysis of Euro-barometer survey data, using multilevel regression statistics. The authors' findings have important consequences for [an] understanding of the relationship between skill formation processes, labour market institutions and social equality.

29 citations

ReportDOI
TL;DR: In inference methods for best linear approximations to functions which are known to lie within a band, it is proved that the support function approximately converges to a Gaussian process, and validity of the Bayesian bootstrap is established.
Abstract: This paper provides inference methods for best linear approximations to functions which are known to lie within a band. It extends the partial identification literature by allowing the upper and lower functions defining the band to be any functions, including ones carrying an index, which can be estimated parametrically or non-parametrically. The identification region of the parameters of the best linear approximation is characterized via its support function, and limit theory is developed for the latter. We prove that the support function approximately converges to a Gaussian process and establish validity of the Bayesian bootstrap. The paper nests as special cases the canonical examples in the literature: mean regression with interval valued outcome data and interval valued regressor data. Because the bounds may carry an index, the paper covers problems beyond mean regression; the framework is extremely versatile. Applications include quantile and distribution regression with interval valued data, sample selection problems, as well as mean, quantile, and distribution treatment effects. Moreover, the framework can account for the availability of instruments. An application is carried out, studying female labor force participation along the lines of Mulligan and Rubinstein (2008).

29 citations

Journal Article
TL;DR: In this article, Marco et al. examine the actitudes muy distintas in funcion de preferenciaspoliticas, confirmando their importance in the literatura sobre ''moral fiscal'' de los individuos.
Abstract: Resumen Este articulo se inscribe en la literatura sobre fraude y «moral fiscal» de los ciudadanos. En el se analiza la actitud delos espanoles frente a dos tipos de fraude fiscal: la ocultacion de rentas para pagar menos impuestos y la ocultacionde informacion para disfrutar fraudulentamente de bienes y servicios a los que de otro modo no se tendria derecho.Ademas, se examinan los factores determinantes de estas variables mediante la estimacion de modelos probit orde-nados. De acuerdo con los postulados de la Teoria de la Eleccion Publica se han incluido en el analisis variables poli-ticas. Estas variables han resultado significativas y muestran actitudes muy distintas en funcion de las preferenciaspoliticas, confirmando su importancia sobre la «moral fiscal» de los individuos. Palabras clave: Moral fiscal, evasion fiscal, eleccion publica, probit ordenado. Clasificacion JEL: H26, H31. 1. Introduccion: Marco teorico y motivacion del trabajo La literatura economica sobre la evasion fiscal ha venido historicamente condicionadapor la dificultad obvia de medir una actividad que por su caracter ilicito presenta evidenteslagunas de informacion. Es por ello por lo que buena parte de los trabajos publicados en estecampo son analisis teoricos inscritos en el marco de la Economia de la Informacion y los mo-delos principal-agente, cuyo objetivo esencial es sugerir a las autoridades administrativas es-trategias adecuadas para combatir el fraude a la luz del comportamiento esperado de los con-tribuyentes individuales.

29 citations

Posted Content
TL;DR: In this paper, the authors evaluated the effect of courses in health related subjects and computer science on adult education at upper secondary level (AE) and found that creds equal to one year of AE yield point estimates that range from 5 per cent for indiððviduals with prior two-year upper secondary school to 15 perðÞ for those with prior compulsory school.
Abstract: Adult education at upper secondary level (AE) is an integral part of the Swed­ish educational system. Of the cohort born in 1970, about one third has at some point been registered in AE. This evaluation of AE is the first to use reg­ister data on the course credits actually attained. The results indicate that cred­its equal to one year of AE yield point estimates that range from 5 per cent for indi­viduals with prior two-year upper secondary school to 15 per cent for those with prior compulsory school. The positive effects are mainly driven by courses in health related subjects and computer science. Of the participants in AE, more than 40 per cent continue to university. The returns to years in higher edu­cation are not found to be dif­ferent between individuals with and without a prior AE regis­tration except for those with one year or less at uni­versity. Keywords: Adult education, wage earnings JEL-codes: J68, H52

29 citations

Journal ArticleDOI
TL;DR: The onset of type 1 diabetes in young adults has long-term detrimental consequences on earnings that cannot be attributed to confounds, and is particularly vulnerable to the effects of onset of a chronic disease.
Abstract: Aims/hypothesis Young adults in the early stages of their participation in the labour market may be particularly vulnerable to the effects of onset of a chronic disease. Our aim was to quantify the consequences of the onset of type 1 diabetes in young adults on annual earnings, using individual-level longitudinal data before and after the onset of diabetes.

29 citations