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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 paper analyzed the effect of assigning homework on student achievement using data from 16 OECD countries who participated in TIMSS 2007 and found a modest but statistically significant effect of homework on students' achievement.
Abstract: By using data from 16 OECD countries who participated in TIMSS 2007, this paper analyzes the effect of assigning homework on student achievement. The identification rests on within-student variation in homework across subjects in a sample of students who have the same teacher in both mathematics and science. Unobserved teacher and student characteristics are conditioned out of the model by applying a difference-in-difference approach. We find a modest, but statistically significant effect of homework.
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TL;DR: This article found that for both men and women with less than a high school degree, the median DI participation rate is 6.6 times the participation rate for those with a college degree or more.
Abstract: The goal of this paper is to draw attention to the long lasting effect of education on economic outcomes. We use the relationship between education and two routes to early retirement - the receipt of Social Security Disability Insurance (DI) and the early claiming of Social Security retirement benefits - to illustrate the long-lasting influence of education. We find that for both men and women with less than a high school degree the median DI participation rate is 6.6 times the participation rate for those with a college degree or more. Similarly, men and women with less than a high school education are over 25 percentage points more likely to claim Social Security benefits early than those with a college degree or more. We focus on four critical "pathways" through which education may indirectly influence early retirement - health, employment, earnings, and the accumulation of assets. We find that for women health is the dominant pathway through which education influences DI participation. For men, the health, earnings, and wealth pathways are of roughly equal magnitude. For both men and women the principal channel through which education influences early Social Security claiming decisions is the earnings pathway. We also consider the direct effect of education that does not operate through these pathways. The direct effect of education is much greater for early claiming of Social Security benefits than for DI participation, accounting for 72 percent of the effect of education for men and 67 percent for women. For women the direct effect of education on DI participation is not statistically significant, suggesting that the total effect may be through the four pathways.
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TL;DR: In this paper, the authors examine whether this results in a trade-off between short-term gains and long-term losses by considering differences in the labour market careers of vocationally and generally educated respondents in the 2012 Programme for the International Assessment of Adult Competencies (PIAAC).
Abstract: An important issue in the design of secondary-level education is the balance between conveying general and occupation-specific (vocational) skills. On the one hand, vocationally oriented programmes, providing occupation-specific skills with immediate labour market relevance, have repeatedly been shown to secure safe pathways into employment. On the other hand, these programmes tend to put less emphasis on developing general knowledge, skills and competencies, including numeracy and literacy, which are foundational to lifelong learning. Hence, when the needs of the labour market change, employees who opted for a vocational track when they were at secondary school risk being less flexible in adapting to such changes later in their career. The authors of this article examine whether this results in a trade-off between short-term gains and long-term losses by considering differences in the labour market careers of vocationally and generally educated respondents in the 2012 Programme for the International Assessment of Adult Competencies (PIAAC). Their results suggest that early labour market benefits of vocational specialisation decrease over time; the authors relate this to its lower ability to equip secondary school students – future employees – with skills for lifelong learning.
20 citations