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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 authors analyzed the labor market effects of education abroad from a national perspective using the 2008-2012 Baccalaureate and Beyond Longitudinal Study dataset (B&B: 08/12).
Abstract: Relying heavily on case or regional studies, higher education institutions market the perceived global skills that students acquire from education abroad as a value-added commodity. As industries increase their global reach, understanding the labor market effects of education abroad from a national perspective is necessary and timely. This study isolates many factors known to influence education abroad using the 2008–2012 Baccalaureate and Beyond Longitudinal Study dataset (B&B: 08/12). Through a 2-level hierarchical linear regression analysis model, earning levels of graduates of undergraduate programs are analyzed, offering a national perspective. The findings revealed that students who participated in education abroad earned more money within the labor market, even during harsh recessionary times. While income differences observed between men and women existed in both samples, initial incomes during the first three years post-graduation demonstrated significantly higher wages for some students ...

10 citations

Journal ArticleDOI
TL;DR: In this paper, the broad effects of learning are investigated using the structural model of human capital in the context of learning, and the authors empirically investigate the broad effect of learning on human capital.
Abstract: Drawing on the changing view and attitude toward the concept of human capital in recent years, this article empirically investigates the broad effects of learning. Using the structural model pres ...

10 citations

Journal ArticleDOI
01 Jan 2016
TL;DR: In this article, the authors explore the nature and consequences of intangible resources and their hierarchical relationship with culture, thus seeking to identify the genuine endogenous sources of local productivity beyond the standard Romer-type of models.
Abstract: This paper seeks to find evidence for the impact of local culture on the share of intangible investments and the results for productivity per worker in the EU15 countries at the NUTS2 level during the period 2000–2008. The main scope of the paper is to explore the nature and consequences of intangible resources and their hierarchical relationship with culture, thus seeking to identify the genuine endogenous sources of local productivity beyond the standard Romer-type of models. In our study we use basic economic and social indicators from two main sources: the EUROSTAT Regional Database and the European Social Survey (ESS). Regression analysis, based on a pooled cross-section and on a balanced panel through a generalized method of moments (GMM) approach, shows evidence in support of: (i) the classical Tiebout hypothesis on cultural dependence of local public goods in the case of three different types of intangible investments: education, health care, and research and development; (ii) the impact of intangible investments on local productivity which confirms their treatment as investments rather than their usual treatment as a spending category in the national accounts. Clearly, the data set used has its limitations, but what remains most noticeable is the added value of the methodologically alternative measures of local culture employed in our analysis, i.e. a novel cultural attitudes Herfindahl Index, a cultural attitudes Segregation Index, and a CBD (Culture-Based Development) two-vector approach (living culture and cultural heritage). The results generated depict a confirmative picture of the hierarchical relationship between intangible investments, culture and productivity at the regional scale in Europe.

10 citations

Journal ArticleDOI
TL;DR: In this paper, the impact of changes in human capital on wage inequality in Mexico is analysed, focusing on decomposing the level of inequality in any given year and the change in inequality over time into observable (eg age, education, etc) and unobservable differences across workers.
Abstract: Over the last two decades, Mexico has witnessed a significant increase in wage inequality, typically attributed to the increase in relative demand for skilled labour Over this period, educational achievements and their distribution across the labour force have also changed substantially In this paper, the impact of changes in human capital on wage inequality in Mexico is analysed The analysis focuses on decomposing the level of inequality in any given year and the change in inequality over time into observable (eg age, education, etc) and unobservable differences across workers The main findings of this paper are that unobservable factors account for most of the inequality in any given year; among the observable factors, human capital emerges as the most important variable explaining the level of inequality in any given year, and, further, it is the changes in human capital, specifically the returns to education, that are mainly responsible for the observed changes in inequality

10 citations