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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, individual wage determinants in France and Hungary in the 1990s are compared to investigate whether or not systemic change has brought the Hungarian model closer to the French one.
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TL;DR: The authors studied the role of college education in determining geographic mobility and concluded that the causal impact of college completion on subsequent mobility is large, and provided some suggestive evidence on the mechanisms driving the relationship between college completion and mobility.
Abstract: College-educated workers are twice as likely as high school graduates to make lasting longdistance moves, but little is known about the role of college itself in determining geographic mobility. Unobservable characteristics related to selection into college might also drive the relationship between college education and geographic mobility. We explore this question using a number of methods to analyze both the 1980 Census and longitudinal sources. We conclude that the causal impact of college completion on subsequent mobility is large. We introduce new instrumental variables that allow us to identify educational attainment and veteran status separately in a sample of men whose college decisions were exogenously influenced by their draft risk during the Vietnam War. Our preferred IV estimates imply that graduation increases the probability that a man resides outside his birth state by approximately 35 percentage points, a magnitude nearly twice as large as the OLS migration differential between college and high school graduates. IV estimates of graduation’s impact on total distance moved are even larger, with IV estimates that exceed OLS considerably. We provide evidence from the National Longitudinal Survey of Youth (NLSY) 1979 that our large IV estimates are plausible and likely explained by heterogeneous treatment effects. Finally, we provide some suggestive evidence on the mechanisms driving the relationship between college completion and mobility.
14 citations
01 Jan 2009
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TL;DR: In this paper, the authors examined the role of education in the labor market and to understand how returns to education change over time in rural China, using nationally representative survey data from 2004 to 2015.
Abstract: The purpose of this paper is to examine the role of education in the labor market and to understand how returns to education change over time in rural China.,Using nationally representative survey data from 2004 to 2015, this study provides insights on wage determination in the labor market and examines how the returns to education in rural China differ with time and educational endowment. This study applies ordinary least squares estimation and the Heckman selection model to estimate the returns to education.,The returns to education decreased during the observed years from more than 6 percent in 2004 to only about 3 percent in 2011, rising to nearly 4 percent in 2015. The overall trend is robust and observed within groups defined by education. Additionally, the returns to education vary greatly with educational endowment. Tertiary education has always maintained a high rate of returns at nearly 10 percent, while returns to senior high school education and below have gradually diminished.,The authors believe that the results will not only enrich studies on the returns to education in rural China, but also provide a basis for diagnosing the changes of rural labor market in the early twenty-first century.
14 citations
TL;DR: In this paper, the authors employ variation from a large-scale reform of the Danish grant system to identify the impact of study grants on drop-out and completion of higher education.
Abstract: There is little consensus on how financial aid affects drop-out from or completion of higher education, yet huge amounts are spent on financial aid for higher education This study adds to the literature by employing variation from a large-scale reform of the Danish grant system to identify the impact of study grants on drop-out and completion of higher education Discrete duration models for time-to-drop-out and time-to-completion are estimated on highly reliable register data that includes information on high school GPA and parental education and income Intention-to-treat estimates (ITT) of the reform and treatment effects of study grants using the reform as instrumental variable (IV) are presented using various specifications of the reform effect Both sets of parameters (ITT and IV) indicate that the reform and grant levels are negatively related to drop-out, although not supported by all reform effect specifications, whereas no impact is found on completion rates
14 citations