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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: In this paper, the effects of completing a Vocational Education and Training (VET) qualification on individual labour market outcomes, particularly on the probability of employment and on earnings, were provided for 1997, 2001 and 2005.
Abstract: We provide estimates of the effects of completing a Vocational Education and Training (VET) qualification on individual labour market outcomes, particularly on the probability of employment and on earnings. Estimates are provided for 1997, 2001 and 2005. The estimation methodology is based on matched comparisons of persons at each level of VET qualification among Year 12 completers and non-completers. We find that among Year 12 completers, there is little benefit from obtaining certificate level qualifications, but there are positive employment and earnings outcomes associated with obtaining diploma level qualifications. Among persons who did not complete Year 12, however, there are benefits from obtaining any kind of VET qualification, including the lower level Certificate I and II qualifications.
20 citations
TL;DR: Evidence is provided that physical activity in adolescence may not only predict academic success during compulsory basic education but also boost educational outcomes later in life.
Abstract: PurposeThis longitudinal study examined the role of leisure-time physical activity in academic achievement at the end of compulsory basic education and educational attainment in adulthood.MethodsThe data were drawn from the ongoing longitudinal Cardiovascular Risk in Young Finns Study, which
20 citations
01 Jan 2005
TL;DR: In this article, structural reforms of higher education and propose more effective use of public subsidies, more efficient modes of financing, more diversity, competition and transparency, and larger private contributions through income-contingent student loans.
Abstract: Although there are exceptions, most European universities and institutions of higher education find it difficult to compete with the best universities in the Anglo-Saxon world. Despite the Bologna agreement and the ambitions of the Lisbon agenda, European universities are in need of fundamental reforms. We look at structural reforms of higher education and propose more effective use of public subsidies, more efficient modes of financing institutions of higher education, more diversity, competition and transparency, and larger private contributions through income-contingent student loans. In the process we discuss the nature of an institution of higher education, grade inflation, fair competition, private and social returns to education, income-contingent loans, student poverty and transparency. We sum up with seven recommendations for reform of higher education.
20 citations
TL;DR: In this paper, the authors analyse whether formal education and on-the-job skill acquisition are substitutes or complements for a sample of Flemish school-leavers and find that higher educated workers are more likely to acquire additional skills.
Abstract: We analyse whether formal education and on-the-job skill acquisition are substitutes or complements for a sample of Flemish school-leavers. Skill acquisition is measured directly through subjective assessments. We find that higher educated workers are more likely to acquire additional skills. While this is primarily explained by between-occupation effects, also within-occupation effects are revealed. Undereducated workers have lower overall skill acquisition probabilities than adequately educated workers in similar occupations; overeducated workers with a vocational degree acquire fewer transferable or general skills than their adequately educated colleagues. Overeducated workers also acquire fewer additional skills than adequately educated workers with similar educational backgrounds.
20 citations
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TL;DR: In this article, the authors used Swedish register data 1990-2004 of low skilled siblings aged 24-43 in 1994 to estimate difference-indifference-in-differences models which include family fixed effects.
Abstract: At various political levels, including the OECD and the EU, it is repeatedly emphasized that upgrading the low skilled is an important area for the economic and social development of modern societies. Employers are typically reluctant to train low skilled, who in their turn are unwilling to participate due to financial constraints or a perception of low quality and/or returns to training. If this is a market imperfection, a possible remedy is suggested by public provision of formal education where enrollees are eligible for financial support. However, the costs may be large and the economic returns to formal adult education (AE) for low skilled, a crucial measure to assess if expenses should be increased or decreased, is a virtually unexplored issue. This study uses Swedish register data 1990-2004 of low skilled siblings aged 24-43 in 1994 to estimate difference-indifference-in-differences models which include family fixed effects. It is found that a year of AE improves earnings by 4.4 per cent, but calculations indicate that the private returns alone only roughly cover the costs incurred by society, implying that social returns to AE are needed to justify the expenses.
19 citations