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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: It is found that maternal education reduces the burden of maternal mental health problems on child development, particularly the case for children of mothers with high levels of education.
Abstract: This study uses the longitudinal data of Young Lives for Peru to investigate the protective role that maternal education has for children whose mothers suffer from mental health problems. Our first set of findings confirms previous research in this area by showing that maternal education is associated with reduced risk of mental health problems for mothers and with improved nutrition and cognitive development for their children. We further find that maternal education reduces the burden of maternal mental health problems on child development. This is particularly the case for children of mothers with high levels of education. Unfortunately, for children of mothers with low levels of education maternal mental health problems continues to predict poor nutritional status and poor cognitive development for children. These results suggest that monitoring and support may be especially important for mothers with lower levels of education if inequalities across generations are to be reduced.
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TL;DR: A simple framework for nonlinear instrumental variable regression based on a kernelized conditional moment restriction known as a maximum moment restriction (MMR) that results in easy-to-use algorithms with a justified hyper-parameter selection procedure is proposed.
Abstract: We propose a simple framework for nonlinear instrumental variable (IV) regression based on a kernelized conditional moment restriction (CMR) known as a maximum moment restriction (MMR). The MMR is formulated by maximizing the interaction between the residual and the instruments belonging to a unit ball in a reproducing kernel Hilbert space (RKHS). The MMR allows us to reformulate the IV regression as a single-step empirical risk minimization problem, where the risk depends on the reproducing kernel on the instrument and can be estimated by a U-statistic or V-statistic. This simplification not only eases the proofs of consistency and asymptotic normality in both parametric and non-parametric settings, but also results in easy-to-use algorithms with an efficient hyper-parameter selection procedure. We demonstrate the advantages of our framework over existing ones using experiments on both synthetic and real-world data.
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Dissertation•
01 Jan 2002TL;DR: In this paper, the authors investigated the performance of the Swedish active labour market policy in the context of high unemployment atypically experienced by Sweden in the 1990s, using a dataset of more than 110,000 individuals followed for five years.
Abstract: The first part of the thesis addresses a programme evaluation problem: the estimation of the short- and long-term effects of the Swedish active labour market programmes on participants’ subsequent labour market outcomes, in particular individual employment probability and collection of unemployment benefits over time. Exploiting a unique and comprehensive new Swedish dataset with extensive information on more than 110,000 individuals followed for five years, semiparametric propensity score matching techniques are adapted to the Swedish institutional context to investigate the overall effectiveness of the ‘Swedish model’ of labour market policy in the context of the high unemployment atypically experienced by Sweden in the 1990s. The performance of the Swedish system is thus considered in its entirety, combining all the programmes into one and focusing on the interactions between the unemployment benefit system and the programme system. Subsequently, the relative performance of the six main types of programmes available to unemployed adults in the 1990s is analysed, both relative to one another and vis-a-vis more intense job search in open unemployment. The differential performance of labour market training, workplace introduction, work experience placement, relief work, trainee replacement and employment subsidies is investigated using a multiple-treatment extension of the propensity score matching method. The second part of the thesis deals with the evaluation problem in the returns to education framework. Different non-experimental estimation methods to recover the effect of education on earnings – ordinary least squares, instrumental variables, control function and matching – are reviewed and contrasted in the context of alternative microeconometric models – single- and multiple-treatment, homogeneous- and heterogeneous-returns models. The methods are subsequently applied to high quality data – the British 1958 NCDS birth cohort – to estimate private returns to schooling and to illustrate the sensitivity of the different estimators to model specification and data availability. The first part of the thesis addresses a programme evaluation problem: the estimation of the short- and long-term effects of the Swedish active labour market programmes on participants’ subsequent labour market outcomes, in particular individuale mployment probability and collection of unemployment benefits overtime. Exploiting a unique and comprehensive new Swedish dataset with extensive information on more than 110,000 individuals followed for five years, semiparametric propensity score matching techniques are adapted to the Swedish institutional context to investigate the overall effectiveness of the ‘Swedish model’ of labour market policy in the context of the high unemployment atypically experienced by Sweden in the 1990s. The performance of the Swedish system is thus considered in its entirety, combining all the programmes into one and focusing on the interactions between the unemployment benefit system and the programme system. Subsequently, the relative performance of the six main types of programmes available to unemployed adults in the 1990s is analysed, both relative to one another and vis-a-vis more intense job search in open unemployment. The differential performance of labour market training, workplace introduction, work experience placement, relief work, trainee replacement and employment subsidies is investigated using a multiple-treatment extension of the propensity score matching method. The second part of the thesis deals with the evaluation problem in the returns to education framework. Different non-experimental estimation methods to recover the effect of education on earnings – ordinary least squares, instrumental variables, control function and matching – are reviewed and contrasted in the context of alternative microeconometric models – single- and multiple-treatment, homogeneous-and heterogeneous-returns models. The methods are subsequently applied to high quality data – the British 1958 NCDS birth cohort – to estimate private returns to schooling and to illustrate the sensitivity of the different estimators to model specification and data availability.
22 citations
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Posted Content•
TL;DR: This paper examined the relationship across countries between these returns and a range of controls that can be grouped into three broad areas (i) supply factors, (ii) demand factors, and (iii) governmental policies and institutional factors).
Abstract: This Paper examines cross-country variations in the return to schooling for men and women and considers some of the stylised facts that have emerged from the extensive international literature on private returns to schooling. We examine the relationship across countries between these returns and a range of controls that can be grouped into three broad areas (i) supply factors, (ii) demand factors, and (iii) governmental policies and institutional factors. We find that the returns are decreasing in both labour force participation and, in some cases, in the average level of schooling in the population. In the multivariate analysis the only education variables that consistently matter are the proportions completing primary or third level education, which has negative and positive effects respectively. Standard measures of openness such as trade volume have positive effects, and we also find that measures of protection raise the return to schooling. Net inflows of foreign investment are associated with lower schooling returns - a result difficult to reconcile with the argument that capital is complementary to high skill labour and hence increases the skill premium.
22 citations