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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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01 Jan 20194 citations
01 Jan 2010
TL;DR: The authors evaluated the effects of a large-scale randomized field experiment with vouchers for adult education and found no significant average labor market effects of voucher-induced self-financed adult education for compliers, but also find evidence for substantial effect heterogeneity.
Abstract: Lifelong learning becomes increasingly important in times of population ageing, but little is known about the returns to adult education or the effectiveness of government attempts to promote adult learning. This paper evaluates the effects of a large-scale randomized field experiment with vouchers for adult education. We find no significant average labor market effects of voucher-induced self-financed adult education for compliers, but also find evidence for substantial effect heterogeneity. Overall, these findings cast doubts on the effectiveness of existing, unrestricted voucher programs to promote adult education.
4 citations
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TL;DR: • College attainment not only creates higher incomes for graduates themselves, but also creates higher income for others by reducing others' tax burdens by creating much more revenue for the government.
Abstract: • College attainment not only creates higher incomes for graduates themselves, it creates higher income for others.• College attainment substantially reduces others' tax burdens by creating much gr...
4 citations
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TL;DR: In this article, the authors examine how different student employment statuses during tertiary education affect short-term and medium-term labor market returns, and they find significant positive labor market return of "earning while learning" but only for related student employment and not for unrelated student employment.
Abstract: We examine how different student employment statuses during tertiary education affect short-term and medium-term labor market returns. We focus on differences between students studying full-time and students studying and working part-time, i.e., ‘earning while learning’. In addition, we distinguish between student employment with and without relation to the study. Using a representative survey of Swiss graduates of tertiary education, we find significant positive labor market returns of ’earning while learning‘, but only for related student employment and not for unrelated student employment. The returns come in the form of lower unemployment risk, shorter job search duration, higher wage effects and greater responsibility. Therefore, student employment with a relation to the study is a complement to formal education and augments skills and knowledge.
4 citations