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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: The authors showed that the relationship between earnings and college education across generations can be explained by the intergenerational transmission of two distinct abilities and subsequent self-selection of educational attainment, and that it is not necessary to invoke credit constraints.
Abstract: This article shows that the relationships between earnings and college education across generations can be explained by the intergenerational transmission of two distinct abilities and subsequent self‐selection of educational attainment. It is not necessary to invoke credit constraints. The model offers a way to reconcile the predictions of economic theory with empirical results that stress the importance of ability transmission across generations and question the importance of credit constraints for determining college attendance.
12 citations
TL;DR: This paper examined the effects of schooling on wages instrumenting for individual schooling using cohort-level maternal schooling from previous censuses and found that an additional year of schooling increases hourly wages by 10 percent for men and 12.6 percent for women.
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TL;DR: The authors report results from their long-standing research partnership with the Massachusetts Department of Elementary and Secondary Education and show that income-related gaps in both educational credentials and academic skill have narrowed substantially over the past several years in Massachusetts.
Abstract: We report results from our long-standing research partnership with the Massachusetts Department of Elementary and Secondary Education. We make two primary contributions. First, we illustrate the wide range of informative analyses that can be conducted using a state longitudinal data system and the advantages of examining evidence from multiple cohorts of students. Second, we document large income-based gaps in educational attainments, including high school graduation rates and college-going rates. Importantly, we show that income-related gaps in both educational credentials and academic skill have narrowed substantially over the past several years in Massachusetts.
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TL;DR: In this paper, the authors exploit supply-driven heterogeneity in the expansion of cable television across Norwegian municipalities to identify developmental effects of commercial television exposure during childhood and find that higher exposure to commercial television reduces cognitive ability and high school graduation rates for boys.
Abstract: We exploit supply-driven heterogeneity in the expansion of cable television across Norwegian municipalities to identify developmental effects of commercial television exposure during childhood. We find that higher exposure to commercial television reduces cognitive ability and high school graduation rates for boys. The effects appear to be driven by consumption of light television entertainment crowding out more cognitively stimulating activities. Point estimates suggest that the effects are most negative for boys from more educated families. We find no effect on high school completion for girls, pointing to the growth of noneducational media as a factor in the widening educational gender gap. [ABSTRACT FROM AUTHOR]
12 citations
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TL;DR: In this article, the authors re-examine the wage returns to the 1972 Raising of the School Leaving Age (RoSLA) in England and Wales using a high-quality administrative panel dataset covering the relevant cohorts for almost 40 years of their labour market careers.
Abstract: This paper re-examines the wage returns to the 1972 Raising of the School Leaving Age (RoSLA) in England and Wales using a high-quality administrative panel dataset covering the relevant cohorts for almost 40 years of their labour market careers. With best practice regression discontinuity methods we find at best a zero return to the additional education for men. However, we contend that regression discontinuity methods in this context will give unreliable estimates of the return. Using the panel data to correct for this we find a local average treatment effect of 7% over the lifetime for this additional year of education.
12 citations