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.
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TL;DR: In this paper, the authors apply instrumental variables methods that treat multiple births (e.g., twins, triplets) and same-sex composition as natural experiments to test whether increases in sibship size have a causal effect on the educational attainment of older siblings.
Abstract: Children with additional siblings appear to fare worse on a variety of developmental and educational outcomes across social contexts. Yet, the causal relation between sibship size and later attainment remains dubious, as factors that influence parents’ fertility decisions also shape children’s socioeconomic prospects. We apply instrumental variables methods that treat multiple births (e.g., twins, triplets) and same-sex composition as natural experiments to test whether increases in sibship size have a causal effect on the educational attainment of older siblings in the U.S. We pool several nationally representative datasets, including the Child and Young Adult Cohorts of the NLSY79 and the Panel Study of Income Dynamics, to obtain adequate sample sizes for these methods. Although results indicate that the presence of an additional sibling has a trivial effect on the attainment of older siblings for most families (those with two to four siblings), a large penalty arises with the introduction of a fifth sibling. Our findings imply that the costs associated with sibship size are likely concentrated among the largest families.
4 citations
TL;DR: In this paper, the applicability of a dynamic discrete choice model in accounting for the observed ordinary least squares (OLS) and instrumental variable (IV) estimates of the Mincer equation parameter on returns to schooling was assessed.
4 citations
Dissertation•
01 Jan 2005
TL;DR: In this paper, the authors present estimates of the return to education for wage workers in Canada using 1994 SLID microdata, using the parametric two-stage estimators of the wage equation proposed by Heckman (1974, 1979) and its semiparametric counterparts introduced by Newey (1999) and Robinson (1988).
Abstract: This project presents estimates of the return to education for wage workers in Canada using 1994 SLID microdata. To correct for non-random sampling, the parametric two-stage estimators of wage equation proposed by Heckman (1974, 1979) and its semiparametric counterparts introduced by Newey (1999) and Robinson (1988) are employed. Specification tests proposed by Horowitz (1993) and Hausman (1978) suggest semiparametric approaches are superior to parametric ones in terms of flexibility (consistency or at least efficiency gains), generality and predictability. The endogeneity problem of schooling is considered and schooling is instrumented by parental education. The estimated return for female paid-workers is 4.4-4.9% and 3.9% for male paid-workers in Canada.
4 citations
01 Jan 2013
TL;DR: In this article, the authors present an econometric framework for obtaining an alternative measure of the worker's productivity, a variable hardly available in current labor market data sets, and demonstrate that positive attitude in fact affects productivity positively.
Abstract: By extending Solow’s input augmenting technological progress argument and Becker’s human capital accumulation argument to a cross-sectional framework, the study claims that the recent evidence of a significant positive relationship between the worker’s positive attitude and wage may be attributed partly to a positive correlation between attitude and productivity. To test this hypothesis, the study presents an econometric framework for obtaining an alternative measure of the worker’s productivity, a variable hardly available in current labor market data sets. Using this new variable and following alternative econometric techniques, the study tests the proposed hypothesis, and demonstrates that positive attitude in fact affects productivity positively. This finding implicitly suggests that any program designed to improve the worker’s attitude is likely to enhance his/her productivity and wage. Echoing suggestions of numerous earlier studies, the current study, with a view to improving the worker’s over-all economic performance, recommends psychological training for fostering behavioral skills to supplement traditional schooling that promotes cognitive skills only.
4 citations
01 Apr 2011
TL;DR: In this article, the authors examined the relationship between education and on-farm and off-farm labour incomes and found that returns to education are of the order of between 6% and 9% for each additional year of schooling.
Abstract: This paper estimates returns to education for a sample of farm operators in Northern Ireland. The analysis examines the relationship between education and on-farm and off-farm labour incomes. Human capital earnings functions are estimated to identify the marginal return to education measured as years of schooling as well as the qualification level attained. Extending to a structural model, the methodology controls for the endogeneity of education in the earnings function and potential selection bias associated with off-farm labour market participation. In off-farm employment, the analysis shows that returns to education are of the order of between 6% and 9% for each additional year of schooling. However, on-farm earnings were not found to be significantly related to years of education, although the analysis does identify a significant on-farm return to an agricultural qualification.
4 citations