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.
Citations
More filters
TL;DR: The authors found that the decisions to be a teenage mother, to quit school, and to be less attached to the labour market might all stem from some personal or family characteristics, such as personality traits.
Abstract: Common wisdom states that teenage childbearing reduces schooling, labour market experience and adult wages However, the decisions to be a teenage mother, to quit school, and be less attached to the labour market might all stem from some personal or family characteristics
167 citations
TL;DR: The authors examined economic returns to schooling in urban China using OLS and IV methodologies and found that OLS estimates of the returns to education are lower in China than in other transition economies, whereas IV estimates are higher in China.
165 citations
TL;DR: The authors quantifies the option value arising from sequential schooling decisions made in the presence of uncertainty and learning about academic ability and estimates that option value accounts for 14 percent of the total value of the opportunity to attend college for the average high school graduate and is greatest for moderate-aptitude students.
Abstract: This paper quantifies the option value arising from sequential schooling decisions made in the presence of uncertainty and learning about academic ability. College attendance has option value since enrolled students have the option, but not obligation, to continue in school after learning their aptitude and tastes. I estimate that option value accounts for 14 percent of the total value of the opportunity to attend college for the average high school graduate and is greatest for moderate-aptitude students. Students' ability to make decisions sequentially in response to new information increases welfare and also makes educational outcomes less polarized by background. (JEL D83, I23)
163 citations
TL;DR: The authors studied the effect of fertility on maternal labor supply in Argentina and Mexico exploiting a source of exogenous variability in family size first introduced by Angrist and Evans [Angrist, J., Evans, W., 1998] for the United States and found that the estimates for the US can be generalized both qualitatively and quantitatively to the populations of two developing countries where, compared to the US, fertility is known to be higher, female education levels are much lower and there are fewer formal facilities for childcare.
163 citations
Posted Content•
TL;DR: The authors found strong evidence of sheepskin effects associated with graduation from high school, community college or trade school, and university, accounting for 30 per cent of the return to 16 years of schooling but more than half of returns above 16 years.
Abstract: We study the role of credentials or "sheepskin effects" in the Canadian labour market. Sheepskin effects refer to increases in wages associated with the receipt of a degree after controlling for educational inputs such as years of schooling. We find strong evidence of sheepskin effects associated with graduation from high school, community college or trade school, and university. The importance of credentials increases with educational attainment, accounting for 30 per cent of the return to 16 years of schooling but more than half of returns above 16 years. Our evidence indicates that both years of schooling and degree completion influence earnings.
160 citations