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: Some evidence that low wages lead to more smoking in the overall sample and substantial evidence for men, persons with high school educations or less (<13 years of schooling), and quitters is found.
24 citations
Book•
01 Jan 2005
TL;DR: In this paper, the authors consider the impact of a reform that lowers the age of school graduation by two years by compressing the duration of primary and secondary schooling from 13 to 12 years and also by decreasing the school entry from 6 to 5 years.
Abstract: The relatively long periods of time required to complete the different educational levels in countries such as Norway lead to relative lateness in the school-leaving age and in the timing of subsequent events. A late entry to the labor market involves not only social costs, such as adverse effects on public pensions, but also individual costs in the form of a shortened working life, fewer years to achieve fertility intentions, and a later timing of childbearing that may negatively affect the health of mother and child.
The individual and social costs associated with a late school-leaving raise the question as to whether similar educational standards could be achieved by shifting the timing of education to a younger age. We consider the impact of a reform that lowers the age of school graduation by two years by compressing the duration of primary and secondary schooling from 13 to 12 years and also by decreasing the age of school entry from 6 to 5 years.
By lowering the school-leaving age, the reform would also lower the age of entry to the labor market. However, according to our estimates of the effects on student performance of marginal variations in the timing and duration of schooling, the human capital effects are likely to be either nonexistent or very small. To analyze the effects of the reform, we ran projections of the Norwegian public pension system with a large-scale microbased dynamic model. We find that the reform could have an alleviating effect on the sustainability of the public pension system by reducing the aging-induced growth in the contribution rate by one-tenth in the period from 2000-2100 and by one-fifth if fertility were to increase as a result of the reform.
Policies that aim to lower the school-leaving age while maintaining educational quality could play a role in expanding and rejuvenating the labor force and may represent an important contribution to the sustainability of the public pension system in aging economies such as that of Norway.
24 citations
TL;DR: In this article, the authors explore the impact that the current economic crisis is having on the extent to which education protects migrants and natives from unemployment in Spain, using random constant models on a pooled sample of respondents to the Labour Force Survey (LFS) from 2003 to 2012.
Abstract: In this paper, we explore the impact that the current economic crisis is having on the extent to which education protects migrants and natives from unemployment in Spain. To do so, we use random constant models on a pooled sample of respondents to the Labour Force Survey (LFS) from 2003 to 2012. Specifically, we analyse the market value of the educational credentials held by African, Latin American and East European migrants compared with Spanish males aged 16–50. Our conclusions indicate that inequality in the returns provided by education to migrants and natives has been growing fast in recent years. In other words, migrants have been less able to grant themselves an employment through their education than natives since 2008 when the Spanish economy started to contract and that this process has also been speeding up since. We also identify important differences within the migrant category: while the potential to prevent unemployment among better-educated migrants from Eastern Europe decreased during the...
24 citations
TL;DR: This article found that persons with less-educated parents earn lower wages, but have higher returns to education than persons with higher education levels, and the same interplay between the wage level and marginal returns is found for the effect of gender and cohort.
Abstract: Using information on family background, we estimate returns to education, allowing for the heterogeneity of returns. In order to control for the unobserved heterogeneity shared by family members, we construct a siblings sample and employ family fixed-effects and family correlated random-effects models. Our main result is that family background still matters despite the substantial political efforts to equalize educational opportunities in Germany. Persons with less-educated parents earn lower wages, but have higher returns to education. This supports the view that persons from less-educated backgrounds still face higher marginal costs in the educational system. The same interplay between the wage level and marginal returns is found for the effect of gender and cohort.
24 citations
TL;DR: In this paper, the role of cognitive skills in determining not only individual earnings but also national growth rates is emphasized. But particularly the reactions to demand-side incentives indicate a requirement to focus incentives carefully on achievement.
Abstract: : Recently available evidence emphasizes the role of cognitive skills in determining not only individual earnings but also national growth rates. While prior studies concentrated on just school attainment as a measure of human capital, the availability of more refined quality measures using student achievement assessments demonstrates the inadequacies of these pure quantity measures of schooling. Improving cognitive skills, such as those measured by PISA, has, however, proved difficult. The only viable approach appears to be improving the incentives for higher performance. But particularly the reactions to demand-side incentives indicate a requirement to focus incentives carefully on achievement.
24 citations