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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 article, the authors examined how firms with heterogeneous human capital quality respond differently to a welfare policy shock and found that the pension reform might have increased the return to education of employees by 8.75%.

6 citations

DissertationDOI
01 Jan 2002
TL;DR: In this article, a vorliegende Dissertation will einen beitrag zur Messung of Krankheitsbelastung, Einkommensstruktur and Ausbildungsrenditen in landlichen Westafrika leisten.
Abstract: Die vorliegende Dissertation will einen Beitrag zur Messung von Krankheitsbelastung, Einkommensstruktur und Ausbildungsrenditen im landlichen Westafrika leisten. Ihr Forschungsgegenstand ist die Erhebung und Analyse von Mortalitats-, Morbiditats- und sozio-okonomischen Daten im Gesundheitsdistrikt von Nouna im Nordwesten Burkina Fasos. Die Dissertation besteht aus funf Forschungspapieren. Zwei Artikel wurden bereits in internationalen, referierten Journals (Journal of International Epidemiology und Health Economics) veroffentlicht, nachdem sie zuvor in der Diskussionsschriftenreihe des SONDERFORSCHUNGSBEREICHS 544 "KONTROLLE TROPISCHER INFEKTIONSKRANKHEITEN" veroffentlicht wurden. Ein weiterer Artikel wurde ebenfalls in der genannten Diskussionsschriftenreihe veroffentlicht. Ein Teil der Papiere entstand in den zwei Jahren, wahrend denen ich uber den Sonderforschungsbereich 544 finanziert wurde. Besonders profitiert habe ich von der Zusammenarbeit mit dem Gesundheitsforschungszentrum von Nouna (Centre de Recherche en Sante de Nouna, CRSN), das die Haushaltserhebung Nouna Health District Household Survey (NHDHS) vor Ort durchgefuhrt hat. Innerhalb des Sonderforschungsbereichs war ich verantwortlich fur das Umfragedesign der NHDHS. In Zusammenarbeit mit Mitgliedern des CRSN und Mitarbeitern der Abteilung fur Tropenhygiene und Offentliches Gesundheitswesen der Universitat Heidelberg entwickelte ich den Fragebogen und war verantwortlich fur die Piloterhebung und den zeitlichen Rahmen und verschiedene praktische Aspekte der Erhebung. Daruber hinaus war ich verantwortlich fur die Aufbereitung und Sauberung der Daten in Heidelberg, sowie fur das Erstellen einer endgultigen STATA-Version des Datensatzes. Die empirischen Ergebnisse von Kapitel 6 der vorliegenden Arbeit wurden mit diesem aufbereiteten Datensatz erstellt. Im ersten Papier – Kapitel 2 der Dissertation – wird das Design und die Implementierung der Haushaltserhebung NHDHS beschrieben. Kapitel 3 beschreibt das Saubern und Aufbereiten der Rohdaten sowie die Konstruktion von Einkommensvariablen. Kapitel 4 gibt die Ergebnisse einer Studie zur Messung der Krankheitsbelastung wieder. Die Studie verwendet Mortalitatsdaten, die das CRSN zwischen 1997 und 1999 erhoben hat. Kapitel 5 beschaftigt sich mit methodologischen Fragestellungen der Messung der Krankheitsbelastung. Kapitel 6 befast sich mit der Schatzung von Ausbildungsrenditen.

6 citations

Journal ArticleDOI
TL;DR: This article analyzed how the labor market in a regional city, Leon, evolves using micro-level data to fully inform the debate on decentralization and regional development using labor-income trajectories of emigrants from Mexico City.
Abstract: This paper draws on micro-level data to fully inform the debate on decentralization and regional development. Using labor-income trajectories of emigrants from Mexico City, the paper analyzes how the labor market in a regional city, Leon, evolves. Results from the econometric model suggest that migrants' labor-income trajec- tories differ between the large agglomeration and the regional city in an early stage of the evolution of the labor market, but converge in a later stage. Specifically, the slope of the earning function for recent migrants is steeper and statistically different from the slope for early migrants. The findings presented in this paper enrich the existing theory by providing microfoundations to a typically macroeconomic area of research and enable policy makers to better understand the processes underpinning the evolution of regional labor markets.

6 citations

Posted Content
TL;DR: The authors presented an extended sensitivity analysis which allows researchers to simultaneously bound the maximal and typical bias perturbing the pairs under investigation while maintaining the desired Type I error rate, which is straightforward to implement, simply requiring the solution to a quadratic program.
Abstract: The conventional model for assessing insensitivity to hidden bias in paired observational studies constructs a worst-case distribution for treatment assignments subject to bounds on the maximal bias to which any given pair is subjected. In studies where rare cases of extreme hidden bias are suspected, the maximal bias may be substantially larger than the typical bias across pairs, such that a correctly specified bound on the maximal bias would yield an unduly pessimistic perception of the study's robustness to hidden bias. We present an extended sensitivity analysis which allows researchers to simultaneously bound the maximal and typical bias perturbing the pairs under investigation while maintaining the desired Type I error rate. We motivate and illustrate our method with two sibling studies on the impact of schooling on earnings, one containing information of cognitive ability of siblings and the other not. Cognitive ability, clearly influential of both earnings and degree of schooling, is likely similar between members of most sibling pairs yet could, conceivably, vary drastically for some siblings. The method is straightforward to implement, simply requiring the solution to a quadratic program.

6 citations

01 Jan 2012
TL;DR: Using Danish micro data on high school education, tertiary education, and wages, this paper investigates the importance of the field of study for the returns to education and reveals that the return to a degree within the humanities is the same as that of other fields of study.
Abstract: Using Danish micro data on high school education, tertiary education, and wages, this paper investigates the importance of the field of study for the returns to education. Our OLS results suggest that a degree within the human arts seems considerably less valuable (in terms of earnings) than a degree within other fields, echoing previous result for the UK and US. However, since the choice of which type of education to pursue is likely non-random, these results may reflect selection rather than the causal impact of the field of study on wages. To examine this issue we adopt an instrumental variable approach to the issue at hand. Our identification strategy consists of using observed characteristics of the peer group the individual student were exposed to during high school. In particular, we document that the fraction of female students in a high school impacts on individuals’ choice of education. Similarly, the educational choices of high school seniors and freshmen are highly related. Conditional on high school fixed effects, and a large number of individual specific student characteristics (e.g., family background, high school test performance etc.), these characteristics should not affect wages directly. We therefore employ them as instruments for the choice of field of study at the tertiary level. In contrast to our OLS results, our 2SLS results reveal that the return to a degree within the humanities is the same as that of other fields of study. Hence, the OLS results appears to be attributable to selection. This result is in stark contrast to existing findings in the literature, where human arts students typically are found to do far worse in terms of earnings than students of other disciplines.

6 citations