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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: In this paper, the authors provide an answer to an important empirical puzzle in the retirement literature: while most people know little about their own pension plans, retirement behavior is strongly affected by pension incentives.
Abstract: This paper provides an answer to an important empirical puzzle in the retirement literature: while most people know little about their own pension plans, retirement behavior is strongly affected by pension incentives. We combine administrative and self-reported pension data to measure the retirement response to actual and perceived financial incentives and document an important role for self-reported pension data in determining retirement behavior. Well-informed individuals are far more responsive to pension incentives than the average individual. Ill-informed individuals seem to respond systematically to their own misperceptions of pension incentives.
159Â citations
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12 Jul 2007TL;DR: In this paper, the authors present an overview of the Theoretical Framework for Workplace Training and the benefits of workplace training in the Enlarged Europe, including the costs and benefits of training and reallocation.
Abstract: Introduction PART I THE MACROECONOMICS OF EDUCATION 1. Theory and Facts PART A- EDUCATION PRIORITIES: GROWTH VS. COHESION 2. Cohesion and the Supply of General Skills in Europe 3. Higher Education, Innovation, and Growth PART B- THE MARGINS OF IMPROVEMENT IN EDUCATION INSTITUTIONS: SKILL MISMATCH, SKILL PORTABILITY, AND MOBILITY 4. Internal Mobility, Skills, and Education 5. Skill Mismatch and Over-qualification in the Enlarged Europe 6. Specificity of Skills and Reallocation 7. Policy Implications PART II WORKPLACE TRAINING IN EUROPE 8. Introduction 9. An Overview of the Theoretical Framework 10. Stylised Facts About Workplace Training 11. Training and Labour Market Institutions 12. The Costs and Benefits of Workplace Training 13. Is There Scope for Policy? Final Remarks
159Â citations
TL;DR: In this article, the average causal effects of different lengths of exposure to academic and vocational instruction in the Job Corps (JC) under the assumption that selection into different lengths is based on a rich set of observed covariates and time-invariant factors were investigated.
Abstract: We semiparametrically estimate average causal effects of different lengths of exposure to academic and vocational instruction in the Job Corps (JC) under the assumption that selection into different lengths is based on a rich set of observed covariates and time-invariant factors. We find that the estimated effects on future earnings increase in the length of exposure and that the marginal effects of additional instruction decrease with length of exposure. We also document differences in the estimated effects across demographic groups, which are particularly large between males and females. Finally, our results suggest an important lock-in effect in JC training.
158Â citations
TL;DR: In this article, the authors explore the growth in returns to schooling during transition across Central and Eastern European countries, Russia, and China, and investigate the relative importance of the slow decay of the effects of wage grids compared to the return to the ability that educated individuals have in taking advantage of economic disequilibria caused by reform.
155Â citations
01 Jan 2011
TL;DR: In this paper, the authors critically review the literature that values school quality and performance through housing valuations and find that the literature consistently finds that valuations to be significantly higher in places where measured school quality is higher.
Abstract: In this Chapter, we critically review the sizable literature that values school quality and performance through housing valuations. While highly variable in terms of research quality, the literature consistently finds housing valuations to be significantly higher in places where measured school quality is higher. Thus parents are prepared to pay substantial amounts of money to get their children educated in better performing schools. This conclusion emerges from studies across many countries, using a variety of identification strategies, and at different levels of the education system.
153Â citations