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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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01 Jan 2004
TL;DR: The authors empirically studied how individuals sort across different levels of schooling using a sample of white males from the 1979 cohort of the National Longitudinal Survey of Youth and found that individuals select into the level of schooling in which they have an absolute advantage.
Abstract: In this paper we empirically study how individuals sort across different levels of schooling using a sample of white males from the 1979 cohort of the National Longitudinal Survey of Youth. We find that individuals select into the level of schooling in which they have an absolute advantage. Had high school graduates enrolled in college their wages would have been lower than the wages of college participants. Conversely, had college participants not enrolled in college their wages would have been lower than the wages of regular high school graduates. We illustrate how accounting for changes over time in these sorting patterns is important for the study of wage inequality.
11 citations
TL;DR: The authors presenta una discusion de retornos a la inversion en educación and their estimación for el caso colombiano, and se muestran las variables socioeconomicas y demograficas of los hogares that mas contribuyen a explicar el perfil de gasto.
Abstract: Este trabajo presenta una discusion de los retornos a la inversion en educacion y su estimacion para el caso colombiano. Se utilizaron dos bases en diferentes periodos del tiempo: La primera es una encuesta realizada para trabajadores bogotanos en 1988 y la Encuesta de Calidad de Vida de 1997. En general se encuentra que los hogares gastan el 9.62% de sus ingreso correintes en salud, y se muestran las variables socioeconomicas y demograficas de los hogares que mas contribuyen a explicar el perfil de gasto.
11 citations
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TL;DR: In this paper, the authors analyzed variations of the education wage premium between the 1980s and 1990s can be explained within the framework of a supply and demand model, showing a stable pattern of growth in the demand for education throughout the eighties and nineties.
Abstract: This paper estimates education demand for Spain in order to analyze whether variations of the education wage premium between the 1980s and 1990s can be explained within the framework of a supply and demand model. The evidence reveals a stable pattern of growth in the demand for education throughout the eighties and nineties, empirically showing that differences in the evolution of the education wage premium during the two decades can be explained by varying growth in education supply coupled with stable growth in education demand.
11 citations
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TL;DR: In this article, the authors tried to separate family and income effects and estimate the impact of a financial transfer on educational attainment by simulating a financial support policy and finding that pupils from poorer families are less likely to invest in education.
Abstract: Britain is characterised by a low rate of post compulsory schooling compared to other European countries. To reduce this disparity, the British government has been testing an Education Maintenance Allowance (EMA) where 16 to 19-year olds are given financial support to attend schooling when the family income falls below a threshold. This paper attempts at first separating family and income effects and second estimating the impact of a financial transfer on educational attainment. Children from poorer backgrounds are generally observed to have lower educational outcomes than other youth. However, the mechanism through which household income affects the child's outcomes remains unclear. Either, poorer families are financially constrained which prevents them from investing in the human capital of their offspring, thus, policies of financial support could be efficient at reducing schooling inequality. Or, some parents may be endowed with characteristics that make them less successful on the labour market and worse at parenting. Then, direct support to the children would be more efficient than financial support at reducing inequality in schooling achievements. We propose a methodology that separates financial and familial effects. By simulating a financial support policy, we are able to maintain the observed and unobserved characteristics of the family constant, and estimate the direct effect of an education benefit on post compulsory schooling decisions. As in previous studies, we find that pupils from poorer families are less likely to invest in education. However, a financial transfer would not lead to a significant increase in schooling investment, which supports the view that the family characteristic effects dominate the financial constraint effects. These results may nevertheless be dependent on our methodology. Due to data constraints, we have allocated the financial transfer to the father income, whereas in the currently tested scheme, the EMA goes either to the child or t o the mother. These changes in the recipient of the allocation may have a large effect on our conclusion.
11 citations
01 Jan 2007
TL;DR: In this article, two complementaires, Laseconde, dite methode globale, prend en compte les couts lies a l'investissement educatif and calcule le taux d'actualisation qui egalise benefices and couts prives of l'Investissement en education sur le cycle de vie des individus.
Abstract: Deux methodes complementaires permettent d'estimer les rendements economiques prives de l'education. La premiere (Mincer, 1974) estime une equation de salaire avec l'educationet l'experiencecomme variables explicatives. Laseconde, dite methode globale, prend en compte les couts lies a l'investissement educatif et calcule le taux d'actualisation qui egalise benefices et couts prives de l'investissement en education sur le cycle de vie des individus. Ces methodes sont egalement utilisees au niveau agrege pour estimer les rendements sociaux de l'education. Les differences de rendement dependent du modele economique et social auquel adhere chaque pays ainsi qu'au cadre institutionnel des differents systemes educatifs (modes de selection et surtout de financement). Ces deux methodes classent la France parmi les pays industrialises ou l'investissement educatif est le plus rentable, en particulier pour l'education superieure, au niveau individuel et collectif, avec les Etats-Unis et le Royaume-Uni et devant les pays scandinaves.
11 citations