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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: The authors found that the gender wage gap in Georgia is substantially higher than in other transition countries and used the Blinder Oaxaca decomposition to evaluate gender wage differentials in Georgia between 2000 and 2004.
Abstract: This paper evaluates gender wage differentials in Georgia between 2000 and 2004. Using ordinary least squares, we find that the gender wage gap in Georgia is substantially higher than in other transition countries. Correcting for sample selection bias using the Heckman approach further increases the gender wage gap. The Blinder Oaxaca decomposition results suggest that most of the wage gap remains unexplained. The explained portion of the gap is almost entirely attributed to industrial variables. We find that the gender wage gap in Georgia diminished between 2000 and 2004.
2 citations
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TL;DR: This article explored the implications of country of birth, race, gender, human capital, and timing of arrival for labor market outcomes of a rapidly growing group of new Americans, highlighting their changing composition and heterogeneity.
Abstract: The number of African-born migrants to the U.S. has grown exponentially in recent years and they constitute the most rapidly growing group of foreign-born migrants. Relatively little is known about their labor market outcomes and even less about the heterogeneity in these outcomes by country of birth, race, and time of migration. Using 2000-2011 waves of the American Community Survey, we explore implications of country of birth, race, gender, human capital, and timing of arrival for labor market outcomes of this rapidly growing group of new Americans. By comparing African migrants with each other, we highlight their changing composition and heterogeneity, distinctions that are buried in comparisons with US-born Americans. We document considerable variation in these outcomes by country of birth that reflects differences across the African continent in levels of development, human capital, languages, cultural and racial backgrounds, and opportunities to migrate to the U.S. Although this heterogeneity is evident among both men and women, it is more pronounced among men and is only partially explained by observed human capital and demographic characteristics.
2 citations
01 Jan 2010
TL;DR: In this paper, the authors present empirical evidence on the returns to education in Spain using the Survey on the Quality of Life in the Workplace using five waves of the survey have been pooled to build a dataset for which Mincer-type earning functions are estimated.
Abstract: This paper presents empirical evidence on the returns to education in Spain using the Survey on the Quality of Life in the Workplace. Five waves of the survey have been pooled to build a dataset for which Mincer-type earning functions are estimated. Unlike other analyses experience is computed as actual and not potential experience, and a variable capturing periods of unemployment is also included to better approach the underlying concept, this being specially relevant given high unemployment rates in Spain and average length of these periods among certain groups. We calculate the returns to education for male workers following the simplest Mincer‟s specification estimated by (a) OLS and (b) instrumental variables (IV) techniques as a means to deal with endogeneity concerns regarding schooling and find that returns to education for male salaried workers are 5.68 (OLS) and 7.37 (IV with a family background instrument) giving evidence of a slightly declining trend in the rate of return to education in Spain. The consideration of schooling attainment as qualifications allow relaxing Mincer‟s underlying hypothesis of linearity of the returns to education in schooling. Evidence against this assumption is displayed. We also test the parallelism of log-earnings experience profiles across schooling levels. The empirical analysis is finally extended by focusing on regional differences.
2 citations
01 Jan 2007
TL;DR: Hanushek et al. as mentioned in this paper reviewed evidence on the economic impacts of human capital investment with an eye to where investment decisions might be made, and concluded that simple resource policies have not worked in either developed or developing countries.
Abstract: Eric A. Hanushek Improving schools is frequently high on the policy agenda of both developed and developing countries. The nature of the policy focus, however, differs across countries with some emphasizing increasing school attainment and others focusing on quality concerns. Until recently little evidence was very useful in helping decision makers to formulate appropriate schooling policies. In the last decade, however, there has been a dramatic increase in useful information about the role of human capital in development and about the ways in which governments can promote human capital formation. This paper reviews evidence on the economic impacts of human capital investment with an eye to where investment decisions might be made. While the evidence on actual impacts is quite clear, the evidence on how best to make the investments is less clear. Specifically, recent research underscores the prime importance of educational quality, as measured by cognitive achievement, and the much lower importance of pure school attainment. This research spans both developed and developing nations. On the other hand, on the key question is how cognitive achievement can be improved, the relevant evidence is less clear. There is substantial evidence that simple resource policies have not worked in either developed or developing countries. On the other hand, the leading candidate for high impact is teacher quality, but research on this is largely confined to the United States.
2 citations
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TL;DR: In this article, the authors assess the impact of treatment effect or program applying difference in difference (DD) approach, and identify that the DD estimators are biased under certain conditions.
Abstract: This paper attempts to assess the impact of treatment effect or programme applying difference in difference (DD) approach. This study also identifies that the DD estimators are biased under certain conditions.
2 citations