Posted Content•
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 main problem with the student loan program is that lending limits are too low as mentioned in this paper, while the design of repayments could be improved and higher lending limits would benefit students and promote access at little cost to the government.
Abstract: America’s higher education system is among the best in the world Nevertheless, there is scope for
improvement In particular, there appear to be substantial financial barriers to higher education despite
large government expenditures aimed at promoting access Policy makers have proposed addressing these
barriers by increasing student grants However, grants are costly, inefficient, inequitable and ineffective
Income tax concessions and state government subsidies suffer from similar problems In contrast,
international best practice seems to be converging on student loans with repayments that vary according to
income Income-contingent loans facilitate access to college at low fiscal cost and without the inefficiency
and inequities that accompany grants, subsidies or tax concessions At the same time, they do not
discourage risk-averse or uninformed students in the way that conventional loans do The United States has
an income-contingent loan programme that should be expanded While the design of repayments could be
improved, the main problem with this programme is that lending limits are too low Higher limits,
especially for unsubsidised direct loans, would benefit students and promote access at little cost to the
government Were a good system of loans in place, then less cost-effective means of promoting access,
such as grants and tax concessions, should be cut back
8 citations
Posted Content•
TL;DR: This paper examined the impact of family background on wages and returns to education using data from the GSOEP and showed that family background matters in the determination of wages and that returns to higher education appear to be heterogeneous with family background accounting for part of this heterogeneity.
Abstract: This paper examines the impact of family background on wages and returns to education. Using data from the GSOEP, we show that family background matters in the determination of wages. Moreover, returns to education appear to be heterogeneous with family background accounting for part of this heterogeneity. Estimated returns to education are higher for individuals from families with lower education levels. However, a simple regression analysis suffers from serious endogeneity problems. The construction of a sibling sample allows to control for unobserved characteristics that are shared by family members. Using a family fixed-effects estimation we attempt to reduce the endogeneity bias. Our results suggest that the conventional estimates overstate the returns to education. Moreover, family background accounts or a large part of the variation in wages in the sibling sample.
8 citations
TL;DR: This paper investigated whether Muslims invest differently in their children's education compared to non-Muslims, and found that within-family inequality in children's educational achievements among Muslims relative to non Muslims.
Abstract: Using a unique data set on immigrants living in France in 2003, we investigate whether Muslims invest differently in their children’s education compared to non-Muslims. In particular, we want to assess whether educational inequalities between the children of Muslim and non-Muslim immigrants stem from differences between or within families. After controlling for a broad set of individual and household characteristics, we find no difference in education between children of different religions. However, we do find more within-family inequality in children’s educational achievements among Muslims relative to non-Muslims. The within-family variance is 15 % higher among Muslims relative to Catholics and 45 % higher relative to immigrants with other religions, but the intra-family inequality remains difficult to explain. Overall, our results suggest that Muslim parents tend to redistribute their resources more unequally among their children.
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Dissertation•
01 Jul 2012
TL;DR: In this paper, the authors examined the Chinese economy by focusing on the specialized human capital themes of production processes, regional productivity disparities and convergence, cost competitiveness comparisons and private returns to education from 1978 to 2009.
Abstract: This thesis examines the Chinese economy by focusing on the specialized human capital themes of production processes, regional productivity disparities and convergence, cost competitiveness comparisons and private returns to education from 1978 to 2009.
Chapter 2 reviews the growth accounting model and measurement methods of its components such as capital services, labour inputs, labour composition index and Total Factor Productivity index.
China’s spectacular economic growth is from unequal performance of provinces and regions. Thus, chapter 3 examines effects of the physical and human capital on disparities and convergence of labour productivity, Total Factor Productivity and average wages in China, incorporating the market reform factors. We find that composition-adjusted human capital is more important than capital services in the production function. We also overcome the endogeneity of schooling in the wage function with instrumental variables.
In chapter 4, we discuss industrial disparities and convergence across countries and provinces from labour costs perspective to figure out industries with comparative competitiveness advantage.
Moreover, we correct the Heckman selection bias problems of education returns in chapter 5. We find that education returns keep on rising over time, which support human capital hypothesis rather than the signalling effect for all age groups except the group educated during the “Cultural Revolution”.
8 citations
TL;DR: The authors investigated the causal effect of schooling on health behavior such as smoking and related outcomes such as obesity, and found no causal effect on reduced overweight and obesity on reduced smoking rates in Germany.
Abstract: During the postwar period German states pursued policies to increase the share of young Germans obtaining a university entrance diploma (Abitur) by building more academic track schools, but the timing of educational expansion differed between states. This creates exogenous variation in the availability of higher education, which allows estimating the causal effect of education on health behaviors. Using the number of academic track schools in a state as an instrumental variable for years of schooling, we investigate the causal effect of schooling on health behavior such as smoking and related outcomes such as obesity. We find large negative effects of education on smoking. These effects can mostly be attributed to reductions in starting rates rather than increases in quitting rates. We find no causal effect of education on reduced overweight and obesity.
8 citations