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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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Journal Article•
TL;DR: In this paper, the authors investigated the magnitude and evolution of gender and racial occupational segregation and wage gaps in Brazil from 1987 to 2006, using the PNADs household survey, and employed quantile regression to investigate the role of female and non-white occupational intensity at different points along the conditional wage distribution.
Abstract: This thesis investigates the magnitude and evolution of gender and racial occupational segregation and wage gaps in Brazil from 1987 to 2006. First, we provide the construction of a new harmonized and temporally consistent re-classification of the occupational codes using the Brazilian household survey, the PNADs. This new occupational classification permits an examination of the evolution of the Brazilian occupational structure over a protracted period of time.
Second, we examine the occupational structure in Brazil assessing both the extent
and trends in gender and racial based occupational segregation. We use several wellknown
indices of segregation (Duncan and Duncan, 1955; Moir and Selby-Smith, 1979;
Karmel and Maclachlan, 1988; Silber, 1989) and focus on the evolution over time of the
occupational segregation across formal and non-formal labour markets. An attempt is
made to assess the main forces driving changes in occupational segregation over time by
employing a decomposition of the segregation measures developed by Deutsch,
Flueckiger and Silber (2009).
Third, we investigate the magnitude and evolution of gender and racial pay gaps in
Brazil by employing several decomposition techniques. Together with the standard
Oaxaca-Blinder decomposition, we apply the Brown, Moon and Zoloth (1980)
decomposition technique, which allows us to account for the impact of occupational
segregation on the wage gap. We explore the impact of the selection process on our
decomposition results by employing different parametric corrections (the Heckman
(1979) and Lee (1983) corrections). Several sensitivity checks are also implemented and alternative correction methods investigated such as the non-parametric imputation method
by Olivetti and Petrongolo (2008) and the local wage gap estimation by Machado (2011).
Fourth, we attempt to provide a comprehensive portrait of gender and racial wage
gaps across the entire wage distribution while exploring the impact of gender and racial
occupational segregation on wage determination in the Brazilian labour market. Our
analysis particularly focuses on the evolution of the impact of female and non-white
occupational intensity on wage outcomes and disparities. We employ quantile regression
analysis in order to investigate the role of female and non-white occupational intensity at
different points along the conditional wage distribution. We then apply two different
decomposition techniques, proposed by Machado and Mata (2005) and Melly (2006), and
by Firpo, Fortin and Lemieux (2009), to investigate the determinants of wage disparities
at these different points in the wage distribution and to understand how these
determinants vary across the wage distribution.
Finally, we offer some concluding remarks, discuss the limitation of the research
and provide an agenda for future research on the themes investigated in this thesis.
21 citations
TL;DR: In this article, the authors investigated how the diffusion of technology impacts the growth of this newly measured TFP through two emblematic general purpose technologies, electricity and information and communication technologies (ICT), using a database of 17 OECD countries over the 1890-2013 period.
Abstract: The twentieth century was a period of exceptional growth, driven mainly by the increase in total factor productivity (TFP). Using a database of 17 OECD countries over the 1890–2013 period, this paper integrates production factor quality into the measure of TFP, namely by factoring the level of education of the working-age population into the measure of labor and the age of equipment in the measure of capital stock. We then estimate how the diffusion of technology impacts the growth of this newly measured TFP through two emblematic general purpose technologies, electricity and information and communication technologies (ICT). Using growth decomposition methodology from instrumental variable estimates, this paper finds that education levels contribute most significantly to growth, while the age of capital makes a limited, although significant, contribution. Quality-adjusted production factors explain less than half of labor productivity growth in the largest countries except for Japan, where capital deepening posted a very large contribution. As a consequence, the “one big wave” of productivity growth (Gordon in Am Econ Rev 89(2):123–128, 1999), as well as the ICT productivity wave for the countries which experienced it, remains only partially explained by quality-adjusted factors, although education and technology diffusion contribute to explain the earlier wave in the USA in the 1930s–1940s. Finally, technology diffusion, as captured through our two general purpose technologies, leaves unexplained between 0.6 and 1 percentage point of yearly growth, as well as a large proportion of the two twentieth-century technology waves. These results both support a significant lag in the diffusion of general purpose technologies and raise further questions on a wider view on growth factors, including changes in the production process, management techniques and financing practices. Measurement problems may also contribute to the unexplained share of growth.
21 citations
TL;DR: In this paper, the authors provided new and more accurate information about private rates of return to education (RORE) in Malaysia and found that for both males and females, the average private returns to education are highest at the secondary (16.5 percent and 27.2 percent, respectively) and university level.
21 citations
Dissertation•
01 Jan 2009
21 citations
TL;DR: This article found that the gender wage gap in Georgia is substantially higher than in other transition countries and used the Blinder Oaxaca decomposition to evaluate gender wage differentials in Georgia between 2000 and 2004.
Abstract: This paper evaluates gender wage differentials in Georgia between 2000 and 2004. Using ordinary least squares, we find that the gender wage gap in Georgia is substantially higher than in other transition countries. Correcting for sample selection bias using the Heckman approach further increases the gender wage gap. The Blinder Oaxaca decomposition results suggest that most of the wage gap remains unexplained. The explained portion of the gap is almost entirely attributed to industrial variables. We find that the gender wage gap in Georgia diminished between 2000 and 2004.
21 citations