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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 paper, the authors identify and analyse the relationship that exists between the educational stock, as a measure of the quality, quantity and availability of human resources, and the labour markets' outcomes in Romania.
Abstract: Education plays a central role in preparing individuals to enter the labour market, by offering them the opportunity to improve and increase their amount of knowledge, skills and abilities. Considering this aspect, the purpose of our study is to identify and analyse the relationship that exists between the educational stock, as a measure of the quality, quantity and availability of human resources, and the labour markets’ outcomes in Romania. In order to reach this goal, we have conducted an analysis of the secondary data offered by the specialized literature. These secondary sources included various statistical yearbooks and reports, as well as different scientific researches. The results of our study show that, in Romania, the level of education is positively linked not only to the employment rate but also to the income level.
9 citations
TL;DR: The causal relationships between economic development, health outcomes, and reproductive behavior, which operate in many directions, posing problems for identifying causal pathways are identified in this article, where the focus here is on research methods, findings, and questions that economists can clarify regarding the causal relationships.
Abstract: The program evaluation literature for population and health policies is in flux, with many disciplines documenting biological and behavioral linkages from fetal development to late life mortality, chronic disease, and disability, though their implications for policy remain uncertain. Both macro- and microeconomics seek to understand and incorporate connections between economic development and the demographic transition. The focus here is on research methods, findings, and questions that economists can clarify regarding the causal relationships between economic development, health outcomes, and reproductive behavior, which operate in many directions, posing problems for identifying causal pathways. The connection between conditions under which people live and their expected life span and health status refers to “health production functions.” The relationships between an individual's stock of health and productivity, well-being, and duration of life encompasses the “returns to health human capital.” The control of reproduction improves directly the well-being of women, and the economic opportunities of her offspring. The choice of population policies may be country specific and conditional on institutional setting, even though many advances in biomedical and public health knowledge, including modern methods of birth control, are now widely available. Evaluation of a policy intervention in terms of cost effectiveness is typically more than a question of technological efficiency, but also the motivation for adoption, and the behavioral responsiveness to the intervention of individuals, families, networks, and communities. Well-specified research strategies are required to address (1) the economic production of health capacities from conception to old age; (2) the wage returns to increasing health status attributable to policy interventions; (3) the conditions affecting fertility, family time allocation, and human capital investments; and (4) the consequences for women and their families of policies which change the timing as well as number of births.
9 citations
TL;DR: This paper found that people with a higher education level tend to exhibit more behavioral anomalies in risk attitudes but fewer behavioral anomalies involving time, hence implying that education has multi-functions in preference formation and human capability building.
Abstract: We estimate the effects of education on two dimensions of decision making behavior—risk and time—beyond those considered to be normal-ranged to encompass behavioral anomalies with respect to expected utility as well as time consistency. We conduct a number of incentivized choice experiments on Chinese adult twins to measure decision making behavior, and use a within-twin-pair fixed-effects estimator to deal with unobservable family-specific effects. The estimation results show that a higher education level tends to reduce the degree of risk aversion towards moderate prospects, moderate hazards, and longshot prospects. For anomalies under risk and uncertainty, college graduates exhibit significantly more Allais-type behavior compared to high school dropouts, while high school graduates exhibit more ambiguity aversion as well as a familiarity preference relative to high school dropouts. For decision making involving time, a higher education level tends to reduce the degree of impatience, and to reduce behavioral anomalies including hyperbolic discounting, dread, and hopefulness. The experimental observations suggest that people with a higher education level tend to exhibit more behavioral anomalies in risk attitudes but fewer behavioral anomalies involving time, hence implying that education has multi-functions in preference formation and human capability building. This study contributes to the understanding of the nature of these behavioral anomalies and the roles of education in human decision making.
9 citations
30 Nov 2005
TL;DR: This article examined the importance of heterogeneity and self-selection into schooling for the study of inequality and found that as college enrollment increases in the economy, average college wages decrease and average high school wages increase, and therefore inequality between college and high school groups decreases.
Abstract: In this paper we examine the importance of heterogeneity and self-selection into schooling for the study of inequality. Changes in inequality over time are a combination of price changes, selection bias and composition efiects. To distinguish them, we estimate a semiparametric selection model for a sample of white males surveyed (during the 1990s) by the National Longitudinal Survey of Youth, but our results are applicable to broader analyses of inequality. In our data, as college enrollment increases in the economy, average college wages decrease and average high school wages increase, and therefore inequality between college and high school groups decreases. Moreover, selection bias causes us to understate the growth of difierent measures of the average return to schooling in our sample. It also leads us to understate the increase in wage dispersion at the top of the college wage distribution, and to overstate it at the bottom of the college wage distribution.
9 citations
TL;DR: The study examines the impact of college education on individuals' ideological orientations using a massive expansion of opportunities to attend college known as the graduation quota program in South Korea to identify the long-term effects of collegeeducation on political preferences.
9 citations