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The causal effect of education on earnings

01 Jan 1999-Handbook of Labor Economics (Elsevier)-pp 1801-1863
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 examined the relationship between tertiary enrolment levels and a composite equity variable and found a strong association between higher post-secondary education levels and higher levels of social equity, which is an objective ideal whereby people's achievements are increasingly dependent upon personal effort, choice and initiative rather than predetermined characteristics such as race, gender and socioeconomic background.
Abstract: As developing countries continue to battle poverty despite strong economic growth, understanding the relationship between equity and human development becomes increasingly important. In this context, equity is not equivalent to equality for any specific outcome such as health status, education or income. It is an objective ideal whereby people’s achievements are increasingly dependent upon personal effort, choice and initiative rather than predetermined characteristics such as race, gender and socioeconomic background. As such, equity becomes an issue of moral equality based on the belief that people should be treated as equals, with equal access to life chances. This ideal pursues equal access to public services, infrastructure and rights for all citizens, including the right to education. While evidence suggests that education builds healthier, richer, more equitable societies, research on this has focused predominantly on primary and secondary schooling. The authors of this paper begin with an extensive review of existing research and relevant literature. In the second part of their article, they then report on their own study which furthers the discussion by exploring connections between tertiary education and development using equity as a reflection of human development – a holistic extension of economic development. After extracting relevant data from a number of available world reports by the United Nations, the World Bank and other organisations, they carried out a cross-national statistical analysis designed to examine the relationship between tertiary enrolment levels and a composite equity variable. Their results indicate a strong association between higher post-secondary education levels and higher levels of social equity.

20 citations

Journal ArticleDOI
TL;DR: The authors examined executive compensation using data from two nationally representative samples of small privately held US corporations conducted 10 years apart, in 1993 and 2003, and found that executive pay at small privately-held firms increases with firm size and varies widely by industry.
Abstract: We examine executive compensation using data from two nationally representative samples of small privately held US corporations conducted 10 years apart—in 1993 and 2003. We find that executive pay at small privately held firms increases with firm size and varies widely by industry, consistent with stylized facts about executive pay at public companies. From 1993 to 2003, inflation-adjusted executive pay declined at small privately held companies, in contrast to the run-up in executive pay at large public companies over the same period. Executive pay is higher at more complex organizations, is inversely related to CEO ownership and financial risk and is related to CEO age, education and gender.

20 citations

Journal ArticleDOI
TL;DR: In this article, the authors investigated how the historical development of Protestantism may contribute to explain current literacy disparities in India and found a strong long-term relationship between the historical exposure to Protestant missions and current literacy.
Abstract: As an important expression of culture, religion represents a possible fundamental source of economic and social outcomes. This paper investigates how the historical development of Protestantism may contribute to explain current literacy disparities in India. In order to enable everyone to read the Bible by themselves, Protestants have always stressed the importance of promoting universal literacy. Combining information about the spatial distribution of Protestant missions in India at the end of the nineteenth century with contemporary district-level data, this paper documents a strong long-term relationship between the historical exposure to Protestant missions and current literacy. This pattern does not depend on either local geographic characteristics or the level of historical development of the districts. By exploiting only the variation within groups of geographically contiguous districts and using historical Catholic missions as control group, I verify that this relationship is not driven by unobserved characteristics that may affect both current literacy outcomes as well as the missionaries’ location decisions.

20 citations

Journal ArticleDOI
TL;DR: Drawing on a nationally representative sample of mothers and children participating in the National Longitudinal Surveys, random- and fixed-effects techniques, and repeated measures of children’s cognitive and noncognitive skills, results reveal that educational attainment obtained after children's births is not associated with an improvement in children's skills.
Abstract: A rich tradition of stratification research has established a robust link between mothers' education and the skills in children that forecast children's own mobility. Yet, this research has failed to consider that many U.S. women are now completing their education after having children. Such a trend raises questions about whether increases in mothers' educational attainment can improve their children's skill development and whether these gains are enough to reduce inequalities in skills compared with children whose mothers completed the same degree before they were born. To answer these questions, we draw on a nationally representative sample of mothers and children participating in the National Longitudinal Surveys (NLSY79 and CNLY), random- and fixed-effects techniques, and repeated measures of children's cognitive and noncognitive skills. Contrary to existing research and theory, our results reveal that educational attainment obtained after children's births is not associated with an improvement in children's skills. Such findings offer substantial refinement to a long-standing model of intergenerational mobility by suggesting that the intergenerational returns to mother's education are weaker when education is acquired after children are born. Results also highlight the limits of two-generation policy approaches to reducing inequality in future generations.

20 citations