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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: The authors analyzed the returns to schooling among Chinese rural migrants using data from the 2002 and 2007 China Household Income Project and showed substantial heterogeneity in the schooling rates of return among migrant workers, driven by the substantial increases in schooling coefficients of female migrants, and they expected the endogeneity biases in the estimated schooling returns to be decreasing after considering the change in the ability distribution of migrant workers during 2002-07.
Abstract: This paper analyses the returns to schooling among Chinese rural migrants using data from the 2002 and 2007 China Household Income Project. Our non-parametric estimates show substantial heterogeneity in the schooling rates of return among migrant workers. While the returns to schooling for the overall sample have increased over time, this result is driven by the substantial increases in the schooling coefficients of female migrants. We expect the endogeneity biases in the estimated schooling returns to be decreasing after considering the change in the ability distribution of migrant workers during 2002–07.
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TL;DR: In this paper, the authors investigated in depth Palestinian HE socio-economic outcomes for Palestinians, bringing to the light the meaning of HE under occupation that goes beyond mere economic impact to include its impact on Palestinians' human capital, dignity, and national identity reflecting the unique case of Palestine.
Abstract: Through some extremely difficult experiences, education in general and Higher Education in particular has remained a constant focus of resources in Palestine. Due to the ongoing occupation of Palestine, Palestinian universities could not expect to contribute significantly to economic development in the same way as other institutions around the world. However, the establishment and development of universities in Palestine meant that Palestine was investing in Palestinians, and, for reasons discussed in this paper, the development represented a clear breakthrough to be celebrated throughout Palestinian society. Most of the previous studies on the Economics of Higher Education (HE) have not explicitly dealt with the Economics of Higher Education under occupation, especially in Palestine, neglecting much of the broader context and strategic impact of Palestinian Higher Education. This research investigates in depth Palestinian HE socio-economic outcomes for Palestinians, bringing to the light the meaning of HE under occupation that goes beyond mere economic impact to include its impact on Palestinians' human capital, dignity, and national identity reflecting the unique case of Palestine. This research reveals that from very early on it was clear that Palestinian Higher Education could not give the economy a boost, but that universities did give people a pride in Palestine, which, given the conditions of a brutal military occupation that increasingly separated one Palestinian from the next, amounted to quite a significant achievement. It demonstrated the central role Palestinian HE plays in the life of Palestinians as it is goes beyond means of economic growth to means of survival, building human capital, and maintaining people's dignity and national identity.
5 citations
TL;DR: The role of education in economic growth has been clearly established as mentioned in this paper, and the benefits and costs of education have been discussed in the context of economic growth in historical perspective and relative to OECD nations.
Abstract: The role of education in economic growth has been clearly established. This address is concerned with several issues: What are the benefits and costs of education? Where does the United States stand in educational attainment in historical perspective and relative to OECD nations? What can NABE as a group do to improve education of business economists? What can NABE individual members do?
5 citations
01 Jan 2014
TL;DR: In this article, the impact of over-education and under-education on wages in a developing country, namely Egypt, using the 2012 Egyptian Labor Market Panel Survey (ELMPS), was examined.
Abstract: Previous research has mainly addressed the impact of over/under-education
on wages in developed countries. Therefore, this paper attempts to fill the void gap in the literature by empirically examining the impact of over-education and under-education on wages in a developing country, namely Egypt, using the 2012 Egyptian Labor Market Panel Survey (ELMPS). In order to do so, actual years of educations are divided into
years of required-education, over-education, and under-education using the realized matches
approach. Two modified specifications of the semi-logarithmic Mincer equation are used to
estimate the returns: the ORU specification proposed by Duncan and Hoffman (1981) and the dummy variables specification proposed by Verdugo & Verdugo (1989). We contribute to the literature by employing an instrumental variable approach in order to account for the endogeneity of the three components of education. Our results indicate that using the conventional OLS method leads to an under-estimation of the returns to over-education
because of ability bias. It is found that returns to over-education are positive and in fact they are higher than returns to adequate education, which contradicts previous literature findings. It is also found that there is a trade-off between over-education and years of experience.
5 citations
29 Aug 2014
TL;DR: In this paper, the authors provide new evidence showing that, on balance, public employees are undercompensated relative to their public sector counterparts and that the effects of unions on compensation are considerably smaller in the public than in the private sector.
Abstract: Public sector unionism and collective bargaining are being widely debated in U.S. state and local governments, some of which have sharply reduced or eliminated public employee unionism and bargaining rights. These actions have occurred based on a belief that fiscal adversity facing state and local governments stems mainly from the over-compensation of public employees that has ostensibly resulted from unionism, bargaining and supportive state-level legislation that was enacted decades earlier. These contemporary policy changes, however, are being made with little or no consideration of empirical evidence about public-private sector pay and benefit relationships, the effects of unions on public employee pay, the effectiveness of employment dispute resolution procedures, including arbitration, and the ability of public sector labor and management to effectively combat fiscal adversity and enhance organizational performance. In this paper, we provide new evidence showing that, on balance, public employees are under-compensated relative to their public sector counterparts and that the effects of unions on compensation are considerably smaller in the public than in the private sector. We also review and summarize empirical evidence pertaining to the uses and effectiveness of public sector dispute resolution procedures and to public and private sector joint labor-management initiatives to reform work practices and enhance organizational performance. This evidence indicates that dispute resolution procedures work reasonably well based on process and outcome assessments, and that public sector labor and management can use mutual gains negotiations to benefit not just themselves but citizens and communities more broadly. In addition, we propose a research agenda for a new generation of scholars so that they, like their predecessors, can influence policy makers in making high stakes decisions about public employee unionism and collective bargaining.
5 citations