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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 article, the authors studied the long-run effects of education from generation to generation and examined how and why intergenerational mobility has changed over the last twenty-five years.
Abstract: Over the last fifty years, Egypt has witnessed several reforms and shocks such as the need to absorb a huge influx of new and especially more educated entrants to the labor force. Virtually neglected, however, have been the long run effects of education, including those across generations. The purposes of this study are: (1) to measure and explain changes in the gender-specific short and medium term returns to education in different sectors (private and public, formal and informal, tradable and non-tradable), and (2) to examine the long-run effects of education from generation to generation and, in the process, to measure the extent to which, how and why intergenerational mobility has changed over the last twenty years. In estimating both the determinants of schooling (including its intergenerational transmission) and the returns to schooling and changes therein over time, the study applies a number of estimation techniques to data taken from family members of different generations from the 1988, 1998 and 2006 waves of the Egyptian Labor Market Survey (ELMS). The major substantive findings are: (1) that intergenerational mobility with respect to education has increased across generations, especially for those living in urban areas, (2) that parental education has positive influences on the returns to children’s education, implying that the influence of education of family members goes well beyond its direct influence on children’s education, (3) that both the level of education and the returns to education are strongly affected by location, with locations in rural areas and especially those in Upper Egypt being much less fortuitous than those in urban areas, (4) that there are some significant differences between the effects of the education of particular parents (father or mother) and grandparents on particular children (sons or daughters), (5) the returns to education based on earnings reported in the 2006 ELMS generally fall with the number of controls included and appear to be considerably lower than both estimates in developing countries and estimates for Egypt from the earlier 1988 and 1998 ELMS (especially for males). Educational reforms seem to have contributed to finding (1) (of increased intergenerational mobility over time) but seem to have been insufficient to offset the low and falling rate of return to schooling. The most important methodological conclusions are: (1) that in a context where the role of a parent’s education on that of his/her child is broader than a simple genetic one, grandparents’ education seems to be more suitable as a control variable than as an instrument for parents’ education, (2) that potentially at least a certain educational reform could serve as a suitable instrument for parents’ education but only if further research would allow us to identify differences in the speed of implementation of these reforms across Egypt’s regions.
12 citations
TL;DR: This paper used questions on economic policy, social issues, and environmental issues from the General Social Survey to test the impact of education on attitude extremity, as measured by deviation from centrist or neutral positions, while controlling for intelligence.
Abstract: Education and general intelligence both serve to inform opinions, but do they lead to greater attitude extremity? The potential civic returns to education include not only the sophistication of citizen opinions, but also their moderation. We use questions on economic policy, social issues, and environmental issues from the General Social Survey to test the impact of education on attitude extremity, as measured by deviation from centrist or neutral positions, while controlling for intelligence. We use quantile regression modeling to identify effects on both the most extreme beliefs as well as the most ambivalent. We find that intelligence is a moderating force across the entire distribution in economic, social, and environmental policy beliefs. Completing high school strongly correlates to reduced extremity, particularly in the upper quantiles. College education increases attitude extremity in the lower tail, while postgraduate education increases extremity in the upper tail. Results are discussed in the context of enlightenment and motivated-reasoning theories of beliefs and education. The relevance to political party core and swing voters is briefly discussed.
12 citations
TL;DR: This article found evidence of a significant earnings premium in the financial sector which amounts to about 43% in the average OECD country, after conditioning out observable director-specific and firm-specific characteristics.
Abstract: This article sheds light on the extent of managerial pay in the OECD. It uses a novel database on managerial wages and other types of compensation to compare managerial remuneration across different sectors, especially, the financial sector, and across countries. We find evidence of a significant earnings premium in the financial sector which amounts to about 43% in the average OECD country—after conditioning out observable director-specific and firm-specific characteristics. Yet, there is considerable heterogeneity of earnings across both countries and different types of businesses within the financial sector.
12 citations
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01 Jan 2005
TL;DR: In this article, the authors investigated whether policies that stimulate enrolment in S&E-studies are effective at increasing R&D-activity, and they found evidence for scarcity of S&Es.
Abstract: In this report, we investigate whether policies that stimulate enrolment in S&E-studies are effective at increasing R&D-activity. Scarcity of science and engineering (S&E) graduates could potentially call for government intervention, because of the role of S&E's in R&D, and because R&D in turn is characterised by positive spillovers. First, we analyse the situation on the Dutch labour market for S&E graduates. We do not find evidence for scarcity of S&E graduates. Rather, the labour market position vis-A -vis other graduates weakened. A possible explanation to reconcile this conclusion with a widely felt concern of S&E shortages among employers is increasing internationalisation of the S&E labour market. Concerning policy, we argue that expanding the stock of S&E graduates is not very effective for boosting R&D activity. More than half the number of S&E graduates do not end up working in R&D. De increasing internationalisation of the S&E labour market can diminish the attractiveness of S&E courses.
12 citations
TL;DR: In this paper, the authors study the return to human capital variables for wages of workers observed in Tunisian matched worker-firm data in 1999 and show that workers with low wages or low conditional wages experience higher returns to human-capability than workers belonging to the middle of the wage distribution, while their return to schooling is significantly lower than that of high wage workers.
Abstract: In this paper, we study the return to human capital variables for wages of workers observed in Tunisian matched worker-firm data in 1999. This reveals us how returns to human capital in a Less Developed Country like Tunisia may differ from the industrial countries usually studied with matched data. We develop a new method based on multivariate analysis of firm characteristics, which allows us most of the benefits obtained by introducing firm dummies in wage equations for studying the effect of education. It also provides a human capital interpretation of the effect of these dummy variables. Moreover, in the studied data, using three firm characteristics easily collectable yields results close to those obtained by using the matched structure of the data. The workers with low wages or low conditional wages experience greater returns to human capital than workers belonging to the middle of the wage distribution, while their return to schooling is significantly lower than that of high wage workers. The estimates support the hypothesis that human capital is associated with positive intra-firm externality on wages. Therefore, a given worker would be more productive and better paid in an environment strongly endowed in human capital. However, the low wage workers do not take advantage of the human capital in the firm. Conversely, the low wage workers benefit from working in the textile sector in terms of wages unlike the middle and high wage workers. Finally, the low wage workers and high wage workers benefit from an innovative environment, while the middle wage workers do not.
12 citations