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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 article, the authors compared parametric and semiparametric estimates of the sample selection model for the case of return to schooling for african and coloured women in South Africa.
Abstract: This paper estimates return to schooling for african and coloured women in South Africa It compares parametric and semiparametric estimates of the sample selection model for the case of return to schooling The parametric estimator is the one proposed by Heckman (1979) and the semiparametric estimator proposed by Newey (1991) and Klein and Spady (1993) It also attempts to correct endogeneity and mesurement error by using instruments of schooling Following recent literature, the paper uses community variables primary and secondary school proximity and availability as instruments Using instrumental variables increases the return to schooling substantially Parametric corrections does not change the results but semiparametric corrections increases the return even more
3 citations
TL;DR: Li et al. as discussed by the authors analyzed the changes in public-private sector earnings differentials for local residents in urban China between 2002 and 2007 and found that earnings gaps across ownership have been reducing during this period and that the convergence trend has been in favor of the private and semi-public sectors as opposed to the public sector.
Abstract: This paper analyzes the changes in public-private sector earnings differentials for local residents in urban China between 2002 and 2007. We find that earnings gaps across ownership have been reducing during this period and that the convergence trend has been in favor of the private and semi-public sectors as opposed to the public sector. This is in sharp contrast to what occurred at the turn of the century, when employees of public administration and enterprises were found to enjoy a very much privileged situation. On the one hand, differences in endowments are found to play a growing role in explaining earnings differentials. On the other hand, although starting to become less an issue, segmentation across ownership remains important, especially for high-wage earners.
3 citations
01 Aug 2004
TL;DR: In this paper, a modele econometrique d'offre de travail sur les marches officiel et souterrain en presence de la fiscalite and des politiques de lutte contre la fraude is presented.
Abstract: Cet article presente un modele econometrique d’offre de travail sur les marches officiel et souterrain en presence de la fiscalite et des politiques de lutte contre la fraude. Nous specifions une fonction d’utilite quadratique afin d’imposer un minimum de structure aux preferences individuelles. Les estimations des parametres sont obtenues par la methode du maximum de vraisemblance a information complete. Notre approche tient compte de l’endogeneite de la probabilite de detection et de l’amende. Elle elimine ainsi le biais potentiel de dissonance cognitive associe aux variables subjectives. Nous procedons aux estimations sur donnees individuelles canadiennes. Nos resultats confirment l’influence des parametres fiscaux et rejettent les hypotheses de separabilite additive de la fonction d’utilite et de substitution parfaite des heures de travail.
3 citations
01 Jan 2003
TL;DR: In this paper, the authors provide an analytical review of previous estimates of the rate of return on schooling investments in France and measure how these estimates vary over time, with the nature of data and by estimation methods.
Abstract: In this paper, we provide an analytical review of previous estimates of the rate of return on schooling investments in France and measure how these estimates vary over time, with the nature of data and by estimation methods. According to Ashenfelter Harmon and Oosterbeek (1999) approach (denoted below AHO), we do not find evidence of reporting bias in the estimates and, after taking due account of this bias, we find that differences in estimation methods still exist. Differences of specification in earning functions have also to be taken into account as well as the composition of sample (male/female, public/private sector). We also find that estimated returns have been decreasing in France since the end of the 60’ and suggest a “meta Phillips curve” as a challenging explanation for this evolution.
3 citations
TL;DR: In the midst of an ongoing recovery that has not sparked large-scale job growth, some observers and analysts of higher education have suggested that it may not pay an individu...
Abstract: Is college worth it? In the midst of an ongoing recovery that has not sparked large- scale job growth, some observers and analysts of higher education have suggested that it may not pay an individu...
3 citations