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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, the adoption of FEE-HELP (a 2005 federal government financial instrument based on the Higher Education Contribution Scheme (HECS) was analysed.
Abstract: The public vocational education and training (VET) system is one of the few areas in Australia's tertiary education system where students are required to pay upfront fees without access to loan assistance. These arrangements may lead to sub-optimal educational outcomes to the extent that prospective students reject a VET education on the basis of short-term financial constraints. In this paper we analyse some of the important issues related to the adoption of FEE-HELP (a 2005 federal government financial instrument based on the Higher Education Contribution Scheme (HECS)). It is argued that income contingent loans of this kind are associated with the advantages of both default-protection and consumption smoothing. Using data from the first three waves of the Household Income and Labour Dynamics in Australia (HILDA) survey, we examine various empirical issues associated with the adoption of FEE-HELP in VET, including the extent of private salary returns to VET qualifications. As well, we explore issues related to the public subsidies inherent in the adoption of FEE-HELP in VET, and illustrate the time periods involved in loan repayments for various assumptions concerning the size of the charge and the future income of VET graduates. Administrative issues are considered, as are the implications for the Commonwealth government with respect to potential subsidies associated with the design parameters. In the 2007–08 Federal Budget, the former government announced a small extension of the FEE-HELP system into Australian VET, a reform consistent with improved tertiary funding arrangements.

7 citations

Journal ArticleDOI
TL;DR: This article used a register-based data source covering white-collar manufacturing workers over the period 1995-2004 to analyze polytechnic graduate placement in Finnish manufacturing and found that wages and job classification are higher for polytechic graduates, once other covariates are controlled for.
Abstract: This paper analyses polytechnic graduate placement in Finnish manufacturing. The paper uses a register‐based data source covering white‐collar manufacturing workers over the period 1995–2004. Taken together, the results show that wages and job classification are higher for polytechnic graduates, once other covariates are controlled for. Despite this, almost 20% of graduates from polytechnics have been forced to take a position in manufacturing in which they can be considered to be overeducated. Interestingly, Bachelors of Business Administration are not as well placed as Bachelors of Engineering.

7 citations

Journal ArticleDOI
TL;DR: Evaluating changes in healthcare utilization, health-related quality-of-life, and other resources associated with different strategies of XR-NTX delivery to persons with OUD being released from incarceration to estimate the relative “value” of each strategy is described.
Abstract: Persons with an opioid use disorder (OUD) who were incarcerated face many challenges to remaining abstinent; concomitantly, opioid-overdose is the leading cause of death among this population, with the initial weeks following release proving especially fatal. Extended-release naltrexone (XR-NTX) is the most widely-accepted, evidence-based OUD pharmacotherapy in criminal justice settings, and ensures approximately 30 days of protection from opioid overdose. The high cost of XR-NTX serves as a barrier to uptake by many prison/jail systems; however, the cost of the medication should not be viewed in isolation. Prison/jail healthcare budgets are ultimately determined by policymakers, and the benefits/cost-offsets associated with effective OUD treatment will directly and indirectly affect their overall budgets, and society as a whole. This protocol describes a study funded by the National Institute of Drug Abuse (NIDA) to: evaluate changes in healthcare utilization, health-related quality-of-life, and other resources associated with different strategies of XR-NTX delivery to persons with OUD being released from incarceration; and estimate the relative “value” of each strategy. Data from two ongoing, publicly-funded, randomized-controlled trials will be used to evaluate these questions. In Study A, (XR-NTX Before vs. After Reentry), participants are randomized to receive their first XR-NTX dose before release, or at a nearby program post-release. In Study B, (enhanced XR-NTX vs. XR-NTX), both arms receive XR-NTX prior to release; the enhanced arm receives mobile medical (place of residence) XR-NTX treatment post-release, and the XR-NTX arm receives referral to a community treatment program post-release. The economic data collection instruments required to evaluate outcomes of interest were incorporated into both studies from baseline. Moreover, because the same instruments are being used in both trials on comparable populations, we have the opportunity to not only assess differences in outcomes between study arms within each trial, but also to merge the data sets and test for differences across trials. Initiating XR-NTX for OUD prior to release from incarceration may improve patient health and well-being, while also producing downstream cost-offsets. This study offers the unique opportunity to assess the effectiveness and cost-effectiveness of multiple strategies, according to different stakeholder perspectives.

7 citations

Journal ArticleDOI
TL;DR: In this article, the authors assess factors that affect the choice of an educational support severance package when an employee is offered an array of severance packages that also includes a lump-sum buyout and a retirement package.
Abstract: This research assesses factors that affect the choice of an educational support severance package when an employee is offered an array of severance packages that also includes a lump-sum buyout and a retirement package. Hypotheses developed from human capital theory were tested using multinomial logistic regression. The sample comprised 446 current and former employees of a large unionized manufacturing firm. This sample is of interest because the jobs held by these individuals, manufacturing jobs with high wages and benefits, are rapidly disappearing. Results indicated that women were more likely to accept the educational option, as were younger and single respondents. Two groups who were not eligible for retirement were of particular interest in this study. Those who accepted the educational option and those who chose the lump-sum payment did not differ on educational attainment or tenure, but differed on age, partnered status, gender and salary.

7 citations

01 Jan 2012
TL;DR: In this paper, the authors test a model in which entrepreneurship-speci c human capital accumulation through learning-by-doing is the key factor behind entrepreneurial dynamics and derive testable predictions of the theory that allow it to distinguish from alternatives.
Abstract: This paper tests a model in which entrepreneurship-speci…c human capital accumulation through learning-by-doing is the key factor behind entrepreneurial dynamics. I derive testable predictions of the theory that allow it to be distinguished from alternatives. I then exploit the 1997-98 Indonesian …nancial crisis as a natural experiment that provides exogenous variation in entry into self-employment amongst a relatively high-ability cohort of individuals. Consistent with the model of human capital accumulation, entrepreneurial activity is robustly persistent, and the dynamic improvement in returns exceeds what could be reasonably expected in the absence of skill accumulation.

7 citations