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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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Journal ArticleDOI
TL;DR: The height premium over the life cycle among Swedish twins is relatively constant, amounting to 5–6% higher earnings per decimeter for men and less for women, suggesting that environmental conditions in childhood and youth affect earnings over most of the adult life course.
Abstract: Adult height is a function of genetic predispositions and environmental influences during childhood. Hence, any variation in height among monozygotic twins, who share genetic predispositions, is bound to reflect differences in their environmental exposure. Therefore, a height premium in earnings among monozygotic twins also reflects such exposure. In this study, we analyze the height premium over the life cycle among Swedish twins, 10,000 of whom are monozygotic. The premium is relatively constant over the life cycle, amounting to 5-6% higher earnings per decimeter for men and less for women, suggesting that environmental conditions in childhood and youth affect earnings over most of the adult life course. The premium is larger below median height for men and above median height for young women. The estimates are similar for monozygotic and dizygotic twins, indicating that environmentally and genetically induced height differences are similarly associated with earnings.

11 citations

Posted Content
01 Jan 2006
TL;DR: In this paper, the authors examined how geographical accessibility to higher education affects university enrollment decisions in Sweden and found that the probability of enrollment in university education increases with accessibility to university education.
Abstract: This thesis consists of three papers that examine college choice and earnings among university graduates in Sweden.Paper [I] analyzes how geographical accessibility to higher education affects university enrollment decisions in Sweden. The empirical findings show that the probability of enrollment in university education increases with accessibility to university education. The results also indicate that accessibility adds to the likelihood of attending a university within the region of residence. Both these findings are robust with regard to different specifications of accessibility. The empirical results furthermore indicate that the enrollment decisions of individuals with a less privileged background are more sensitive to accessibility to university education than are the decisions of individuals from a more favorable background.Paper [II] examines the effect on earnings of graduating from five different college groups. The paper relies on selection on observables and linear regression to identify the earnings effect of college choice. Contrary to the majority of previous Swedish studies, we do not find any systematic differences in estimated earnings between college graduates from the different college groups. This finding does not only hold when considering all college graduates, but also when focusing on men and women separately as well as when considering college graduates in two specific fields of education. The results suggest that an estimator of the earnings effects of college choice that does not properly adjust for ability is likely to be substantially biased.Paper [III] estimates the causal effect on earnings of graduating from old universities rather than new universities/university colleges. The study compares estimates from several different matching methods and linear regression. We cannot find any significant differences in earnings between graduates from the two groups of colleges. This holds for male and female sub-samples covering all majors, as well as male and female sub-samples covering two broad fields of education. The results are robust with regard to different methods of propensity score matching and regression adjustment. Furthermore, the results indicate little sensitivity with regard to the empirical support in the data and alternative specifications of the propensity scores.

11 citations

Journal ArticleDOI
27 May 2014
TL;DR: This paper found evidence that vocational schooling plays an important role in easing difficult school to work transitions for South African youth, with a 1 percentage point decrease in vocational enrollment in response to grade failure, compared to a decline of 40 percentage points for academic enrollment.
Abstract: As an alternative to traditional academic schooling, vocational schooling in South Africa may serve as a safety valve for students encountering difficulty in the transition from school to work. Yet if ineffective, vocational schooling could also be a sinkhole, offering little chance for success on the labor market. After defining the terms “safety valve” and “sinkhole” in a model of human capital investment with multiple schooling types, I test for evidence of these characteristics using a panel of urban youth in South Africa. I find support for the safety valve role of vocational schooling, with a 1 percentage point decrease in vocational enrollment in response to grade failure, compared to a decline of 40 percentage points for academic enrollment. In contrast, I fail to find evidence that vocational schooling is a sinkhole, with wage and employment returns at least as large as those for academic schooling. The results suggest that vocational schooling plays an important role in easing difficult school to work transitions for South African youth. I25; J24; J31; O12.

11 citations

Journal ArticleDOI
TL;DR: In this paper, the authors study a Chinese policy which extended the duration of primary school from five years to six but did not change the curriculum, and find that the policy has small, largely positive effects on post-primary educational attainment, and raises average monthly income by 2.6%.

11 citations

Posted Content
TL;DR: In this paper, the intra-household resource allocation on children's education and its earnings consequence in Chinese labour market was investigated, where the siblings structure and the available public facilities were considered as instrumental variables.
Abstract: This paper investigates the intrahousehold resource allocation on children’s education and its earnings consequence in Chinese labour market. In order to overcome the endogeneity problem of schooling, we consider the siblings structure and the available public facilities as instrumental variables. Females’ education is negatively affected by siblings (brothers or sisters) number, while males’ education is also negatively affected by their brothers but much less by their sisters. For the youngest cohort born after 1980, the education of a girl would be heavily impeded by her sisters, reflecting strong distortion of “One-Child Policy” on intrahousehold resource allocation. Comparing the OLS and GIV estimations for returns to schooling, we find that there are downwards biases of OLS estimations for males in all cohorts and in all years. However, for females, downwards biases of OLS estimation are only for data before 2004, as females in the old cohorts actually have upwards biases after 2004. Education returns of the youngest cohort are much higher than old cohorts supporting the argument of heterogeneous human capital accumulation during transition.

11 citations