Posted Content•
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.
Citations
More filters
TL;DR: It is confirmed that a higher unemployment rate at graduation is associated with lower income, lower life satisfaction, greater obesity, more smoking and drinking later in life, and education plays a protective role for these outcomes, especially when unemployment rates are high.
106 citations
01 Jan 2000
TL;DR: The authors showed that the relationship between education attainment and earnings may not be well-founded, and they found that the association between education and earnings was weaker in more recently-born cohorts.
Abstract: Economists have been reluctant to interpret as purely causal the relationship between educational attainment and earnings. In an influential paper in which they use quarter of birth as an instrument for educational attainment in wage equations, Angrist and Krueger interpret their estimates as the causal impact of education on earnings. To support this interpretation, they argue that compulsory school attendance laws alone account for the association between quarter of birth and earnings. In this work we present new evidence suggesting that this interpretation may not be well-founded. We document an association between quarter of birth and earnings in cohorts that were not bound by compulsory school attendance laws. Moreover, we find that the association between quarter of birth and educational attainment was weaker in more recently-born cohorts while no similar pattern existed in the association between quarter of birth and earnings. Our results call into question the validity of any causal inferences based on Angrist and Krueger's estimates regarding the effect of education on earnings.
106 citations
TL;DR: This paper examined measurement error in the reporting of higher education in the 1990 Decennial Census and the post-1991 Current Population Survey (CPS) and found that the level of education is consistently reported as higher than it is (errors are not mean 0).
Abstract: We examine measurement error in the reporting of higher education in the 1990 Decennial Census and the post-1991 Current Population Survey (CPS). We document that measurement error in the reporting of higher education is prevalent in Census data. Further, these errors violate models of classical measurement error in important ways. The level of education is consistently reported as higher than it is (errors are not mean 0), errors in the reporting of education are correlated with covariates that appear in earnings regressions, and errors in the reporting of education appear correlated with the error term in a model of earnings determination. Thus, neither well-known results on classical measurement error nor recent models of nonclassical measurement error are likely valid when using Census and CPS data. We find some evidence that the measurement error is lower in the CPS than in the Census, presumably because first interviews are generally conducted in person.
105 citations
01 Jan 2011
TL;DR: A growing body of work suggests that education offers a wide range of benefits that extend beyond increases in labor market productivity, such as reducing crime, improving health, and increasing voting and democratic participation as mentioned in this paper.
Abstract: A growing body of work suggests that education offers a wide range of benefits that extend beyond increases in labor market productivity. Improvements in education can lower crime, improve health, and increase voting and democratic participation. This chapter reviews recent developments on these ânonproductionâ benefits of education.
105 citations
TL;DR: In this paper, the authors studied the wage effects of the use of alcohol and tobacco and found that for males, tobacco has a negative wage effect of about 10% while alcohol has a positive wage effect about the same size.
105 citations