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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 2010
TL;DR: In this paper, the effects of continuing education participation on wages, time worked in agriculture, and poverty in this population were investigated using data from the U.S. Department of Labor's National Agricultural Workers Survey (NAWS).
Abstract: Migrant farmworkers are among the poorest members of the working class served by the U.S. public workforce investment system. The National Farmworker Jobs Program (NFJP) provides job training and employment assistance to migrant and seasonal farmworkers and their dependents. While stated goals include assisting migrant farmworkers increase “economic stability” by steadying agricultural employment and developing job skills, little empirical evidence exists as to the effectiveness of these programs. This study investigates the effects of continuing education participation on wages, time worked in agriculture, and poverty in this population. Data come from the U.S. Department of Labor’s National Agricultural Workers Survey (NAWS), a nationally and regionally representative survey of employed U.S. farmworkers. Multivariate regression analysis suggest that continuing education participation is associated with approximately 26 percent higher wages all else equal, though variation across programs is large and returns are greatest from job training and English language courses. Program participation is negatively related to annual weeks in agriculture overall, and positively related to nonagricultural work weeks and weeks spent abroad. Understanding the dynamics between continuing education participation and worker outcomes contributes to limited academic literature on migrant education programs and is important for strategic planning pertaining to future workforce investments.
TL;DR: A predictive analysis using national U.S. midlife twin data shows that within-pair schooling differences are endogenous to a variety of childhood exposures, and identical and fraternal twins show similar levels of discordance endogeneity and similar responses to propensity weighting.
Abstract: Schooling differences between identical twins are often utilized as a natural experiment to estimate returns to education. Despite longstanding doubts about the truly random nature of within-twin-pair schooling discordance, such discordance has not yet been understood comprehensively, in terms of diverse between- and within-family peer, academic, familial, social, and health exposures. Here, a predictive analysis using national U.S. midlife twin data shows that within-pair schooling differences are endogenous to a variety of childhood exposures. Using discordance propensities, returns to education under a true natural experiment are simulated. Results for midlife occupation and income reveal differences in estimated returns to education that are statistically insignificant, suggesting that twin-based estimates of causal effects are robust. Moreover, identical and fraternal twins show similar levels of discordance endogeneity and similar responses to propensity weighting, suggesting that the identical twins may not provide demonstrably better leverage in the causal identification of educational returns.
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TL;DR: In this paper, the effects of financial education on a large sample of secondary school students with a randomized experiment performed in the Center (Rome) and North (Milan and Genova) of Italy were analyzed.
Abstract: We analyze the effects of financial education on a large sample of secondary school students with a randomized experiment performed in the Center (Rome) and North (Milan and Genova) of Italy. Our main findings document that the course increases significantly financial literacy at both student and class level but the effect is different in different urban environments. More specifically, we document that the overall (questionnaire plus course) learning effect is significantly higher in the North than in Rome. We finally observe that high grades at final middle school exams, willingness to attend Economics at University and household borrowing status are three factors which significantly and positively affect financial education.