scispace - formally typeset
Search or ask a question
Posted Content

The causal effect of education on earnings

01 Jan 1999-Handbook of Labor Economics (Elsevier)-pp 1801-1863
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.
Citations
More filters
Book ChapterDOI
01 Jan 2018
TL;DR: In modern economies, more educated people typically earn more, live healthier lives, are less likely to be divorced, are more future-oriented, less likely having children while teenagers and less likely being ever arrested as mentioned in this paper.
Abstract: In modern economies, more educated people typically earn more, live healthier lives, are less likely to be divorced, are more future-oriented, less likely to have children while teenagers and less likely to be ever arrested. This chapter discusses some of the drivers of education, its relationship to culture and virtues, as well as its impact on demography and economic development. Economic history is presented by its author as a means of answering the question of causality.

1 citations

Posted Content
TL;DR: In this paper, the authors examined the returns across various levels and majors in higher education using nationally representative India Human Development Survey (IHDS) data 2011-2012 and found that the highest returns for medical graduates followed by engineering graduates and professional postgraduates.
Abstract: This study attempts to examine the returns across various levels and majors in higher education using nationally representative India Human Development Survey (IHDS) data 2011-2012. Higher education here is taken as a heterogeneous sector with various majors each having varying demand in the labour market owing to skill differences. The existing literature on returns to higher education in India fails to assess the probable heterogeneity of returns to higher education across various majors. The present analysis draws on extended Mincerian earnings function to estimate the wage returns to different professional and non-professional degrees with varying majors. After correcting for selectivity bias following Heckman's two-step selectivity correction procedure, the results show highest returns for medical graduates followed by engineering graduates and professional postgraduates.

1 citations

Posted Content
TL;DR: In this paper, the authors follow the rationality of the Human Capital Theory to explain the heterogeneity of returns to schooling in a policy evaluation model with the purpose of testing whether people are blocked in any way (credit constraints, uncertainty or other market environment conditions) when they make their schooling choices.
Abstract: The present paper follows the rationality of the Human Capital Theory to explain the heterogeneity of returns to schooling in a policy evaluation model with the purpose of testing whether people are blocked in any way (credit constraints, uncertainty or other market environment conditions) when they make their schooling choices. The minimal assumption that abler people face lower costs of schooling guarantees the possibility of making the right choice in this framework. The empirical implications of the model are extended further from the properties of ordinary least squares and instrumental variable estimators and centred on predictions about the sign of different policy evaluation parameters (sorting gains and selection biases) and on the shape and variability of marginal returns to education. Within this framework, the paper revises the modern empirical literature on returns to schooling in combination with the theoretical literature on human capital. Empirical evidence for the U.S., shown by a binary choice model, supports the assumption. Evidence obtained from Spanish data in a sequential choice setting does not support the assumption.

1 citations

Posted Content
TL;DR: This paper used a Social Security Administration microsimulation model called Modeling Income in the Near Term to estimate the effect of different rates of wage growth by educational attainment on the future earnings and Social Security benefits of individuals born between 1965 and 1979, sometimes referred to as Generation X.
Abstract: This article explores how faster rates of wage growth for college graduates than for nongraduates could affect the Social Security benefits of future retirees. Using a Social Security Administration microsimulation model called Modeling Income in the Near Term, the authors estimate the effect of different rates of wage growth by educational attainment on the future earnings and Social Security benefits of individuals born between 1965 and 1979, sometimes referred to as “Generation X.” They find that for members of the 1965-1979 birth cohorts, different rates of wage growth by education would substantially increase the gap in annual earnings between college graduates and nongraduates, but that differences in Social Security benefits would increase by a smaller proportion, primarily because of Social Security’s progressive benefit formula.

1 citations

Book ChapterDOI
01 Jan 2020
TL;DR: In this article, the authors analyzed changes in the determinants of enrollment and student performance in Benin after the 2006 Free Primary Education policy (FPE) and simulated the magnitude of the impact on future wage differentials.
Abstract: This chapter analyzes changes in the determinants of enrollment and student performance in Benin after the 2006 Free Primary Education policy (FPE) and simulates the magnitude of the impact on future wage differentials. Using municipality and household-level data, in repeated cross-section regressions, I find that the policy reduced the inequality of access to primary school by increasing the enrollment probability for traditionally disadvantaged groups, including girls, low-income groups, and the northern region populations. Further analysis suggests that inequality in education may have moved from access to quality of learning. Finally, simulations using Mincerian wage equations show an increase in wages with no worsening inequality. Taken together, the results suggest welfare improvements that may have important policy implications for developing countries.

1 citations