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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.
Citations
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Journal ArticleDOI
TL;DR: In this paper, a cost-benefit type of analysis is used to determine the rate of returns to education for the specific case of professional education and training (PET), differentiating for the two types of PET education offered in Switzerland.
Abstract: In this paper, a cost-benefit type of analysis is used to determine the rate of returns to education for the specific case of professional education and training (PET), differentiating for the two types of PET education offered in Switzerland. In contrast to the Mincer-type of analysis, the cost-benefits calculations allow to include the costs of education, direct and indirect, and the risk of unemployment. The net benefits of the PET program are estimated by calculating the discounted wages over the lifecycle, minus lost wages in case of unemployment, and the costs of education for individuals. These net benefits are then compared to those of individuals with upper secondary vocational education. The Swiss Labor Force Survey (SLFS) 1996–2009 is used in this analysis. The panel structure of the SLFS allows to calculate lower bounds of the wage gains, correcting thereby the endogeneity of the educational choice. The results show that, independent of the amount of financial support, individuals completing a PET have significant net-wage gains.

7 citations

Journal ArticleDOI
TL;DR: The authors analyzes the consequences of local fiscal autonomy with respect to political selection and proposes a model of political careers, where the decisions to become candidates and to seek reelection are both endogenous.
Abstract: This paper analyzes the consequences of local fiscal autonomy with respect to political selection. We propose a model of political careers wherein the decisions to become candidates and to seek reelection are both endogenous. Private-sector aptitude and political ability are private information; the latter is revealed to the incumbent during her first period in office. We show that, following an unanticipated reduction in the returns from holding office, incumbents with high market ability are more likely to refrain from running for office again than their lower-ability counterparts. We test that prediction using an unexpected reduction in the upper bound of the municipal property tax rate, announced by Portugal’s prime minister in July 2008, just 15 months before the local elections. We rely on a comprehensive data set for all Portuguese mainland municipalities for the 2005 and 2009 elections, including the characteristics of the municipalities and individual mayors. We employ a difference-in-differences strategy to show that affected mayors—those who were forced to reduce the property tax rate, and thus faced a sharp tax revenue decline—are less likely to seek reelection. This effect is driven by high-professional-status incumbents.

7 citations

Journal ArticleDOI
TL;DR: In Malta, a small island state with the highest rate of economically inactive women in the European Union (EU), this article used a random sample of 402 inactive female homemakers.
Abstract: This empirical study is based in Malta, a small island state with the highest rate of economically inactive women in the European Union (EU). Using a random sample of 402 inactive female homemakers...

7 citations

BookDOI
Dorte Verner1
TL;DR: In the first Living Conditions Survey of 7,186 households covering the whole country and representative at the regional level as mentioned in this paper, the authors found that four key determinants of employment and productivity in nonfarm activities are education, gender, location, and migration status.
Abstract: This paper addresses labor markets in Haiti, including farm and nonfarm employment and income generation. The analyses are based on the first Living Conditions Survey of 7,186 households covering the whole country and representative at the regional level. The findings suggest that four key determinants of employment and productivity in nonfarm activities are education, gender, location, and migration status. This is emphasized when nonfarm activities are divided into low-return and high-return activities. The wage and producer income analyses reveal that education is key to earning higher wages and incomes. Moreover, producer incomes increase with farm size, land title, and access to tools, electricity, roads, irrigation, and other farm inputs.

7 citations

DOI
01 Mar 2019
TL;DR: In this paper, the authors review how students behave and why they behave as they do, before considering the implications for productivity in higher education, focusing on Mexican higher education but also highlighting relevant results in other countries.
Abstract: Performance and productivity have become central goals in higher education reforms since the 1970s. The implications are more or less straightforward when it comes to teaching and research; academic staff should teach and publish more, while institutions should produce more graduates at a lower cost, and these graduates should quickly find a well-paid job that matches their field of study. However, while institutions and academic staff have adapted to these new forms of evaluation and funding, students seem to be less inclined to do so. It is problematic that within this equation, institutions and academics are the producers, while students are relegated to a role of products or, in the best-case scenario, clients. As products, they cannot be expected to comply with the productivity goals or the performance indicators of the institution. This article reviews how students behave and why they behave as they do, before considering the implications for productivity. The analysis focuses on Mexican higher education, but also highlights relevant results in other countries.

7 citations