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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: This article examined the impact of college education on graduates' hours of work and found that variation in hours of working explains a portion of earnings differentials among college graduates, and that female graduates spend fewer hours working than their male counterparts.
Abstract: This study extends the analysis of the economic return of college education up to 10 years after college education and further examines the impact of college education on graduates’ hours of work. The results suggest that variation in hours of work explains a portion of earnings differentials among college graduates. Graduates from high-quality private institutions tend to work longer hours than their peers from other types of institutions. Female graduates spend fewer hours working than their male counterparts. As far as family background is concerned, graduates from high-income families tend to work longer hours and first-generation college graduates tend to work fewer hours. Finally, business majors seem to work longer hours while health and public affair majors less hours.
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TL;DR: In this article, the authors examined the wage returns to qualifications and academic disciplines in the Greek labour market and found that there is considerable variation in wage premiums across the fields of study, with lower returns for those that have a marginal role to play in an economy with a rising services/shrinking public sector.
Abstract: This paper examines the wage returns to qualifications and academic disciplines in the Greek labour market. Exploring wage responsiveness across various degree subjects in Greece is interesting, as it is characterised by high levels of graduate unemployment, which vary considerably by field of study, and relatively low levels of wage flexibility. Using micro-data from recently available waves (2002-2003) of the Greek Labour Force Survey (LFS), the returns to academic disciplines are estimated by gender and public/private sector. Quantile regressions and cohort interactions are also used to capture the heterogeneity in wage returns across the various disciplines. The results show considerable variation in wage premiums across the fields of study, with lower returns for those that have a marginal role to play in an economy with a rising services/shrinking public sector. Educational reforms that pay closer attention to the future prospects of university disciplines are advocated.
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TL;DR: In this article, the authors used a survey of urban Chinese workers in 2005 to estimate the private returns to education and the income elasticity of education expenditure and found that the return to education is relatively low and that expenditure on education is less sensitive to changes in income than expenditure on either food or clothing.
Abstract: This article draws on a survey of urban Chinese workers in 2005 to estimate the private returns to education and the income elasticity of education. Differences in the rates of return to schooling are examined between gender and between age groups. The estimated returns to schooling are found to be higher than those documented in existing studies for the mid-1980s to late 1990s. In particular, considerably higher returns to education are observed among people aged 35 or under, representing those who received standardised education and entered the labour market during the urban economic reform era. The study finds that the income elasticity of education expenditure is relatively low and that expenditure on education is less sensitive to changes in income than expenditure on either food or clothing.
28 citations
TL;DR: In this paper, the authors examined whether longer compulsory schooling has a causal effect on mental health, exploiting a 1972 reform which raised the minimum school leaving age from age 15 to 16 in Great Britain.
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TL;DR: In this paper, the authors model the decisions of young individuals to stay in school or drop out and engage in criminal activities and show that policies that decrease the cost of education for talented students may increase the vulnerability of less talented students to crime.
Abstract: We model the decisions of young individuals to stay in school or drop out and engage in criminal activities. We build on the literature on human capital and crime engagement and use the framework of Banerjee (1993) that assumes that the information needed to engage in crime arrives in the form of a rumour and that individuals update their beliefs about the profitability of crime relative to education. These assumptions allow us to study the effect of social interactions on crime. In our model, we investigate informational spillovers from the actions of talented students to less talented students. We show that policies that decrease the cost of education for talented students may increase the vulnerability of less talented students to crime. The effect is exacerbated when students do not fully understand the underlying learning dynamics.
28 citations