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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 Mar 2003
TL;DR: The relationship between educational levels and wage rates in the Labour Force Survey (LFS) suggests that there is a high financial return to education, however, the LFS also reveals that this varies considerably across individuals, and degree subject plays an important role with Arts degrees having little affect on average wages, while studying Economics, Management and Law have large effects.
Abstract: Participation in post-compulsory education has grown dramatically in the UK in recent times. The proportion of young people going to university to study full time has increased from 13 per cent in 1980 to 33 per cent in 2000.
The relationship between educational levels and wage rates in the Labour Force Survey (LFS) suggests that there is a high financial return to education.
However, the LFS also reveals that this varies considerably across individuals, and degree subject plays an important role with Arts degrees having little affect on average wages, while studying Economics, Management and Law have large effects.
This article attempts to answer the question whether a massive investment in higher education is economically justifiable, by taking a narrow view of the returns to education in terms of additional earnings associated with increased education.
The article also considers whether there is evidence that the expansion of higher education has so flooded the market with highly educated individuals that the return to additional education has reduced, and whether admitting weaker students results in less productive ‘outputs’ from education.
Other questions relate to whether education directly affects people’s workplace productivity either depending on the relevance of their degree subject or because more education may act merely as a signal of higher productivity.
95 citations
TL;DR: The authors used Canadian compulsory schooling laws to identify the relationship between completed schooling and later religiosity, and found that higher levels of education lead to lower levels of religious affiliation later in life.
Abstract: For over a century, social scientists have debated how educational attainment impacts religious belief. In this paper, I use Canadian compulsory schooling laws to identify the relationship between completed schooling and later religiosity. I find that higher levels of education lead to lower levels of religious affiliation later in life. An additional year of education leads to a 4-percentage-point decline in the likelihood that an individual identifies with any religious tradition. This is a reasonably large effect: extrapolating the results to the broader population would suggest that increases in schooling could explain most of the large rise in non-affiliation in Canada in recent decades.
94 citations
TL;DR: The authors showed that returns to schooling are heterogeneous, instruments matter and the LATE interpretation of IV makes sense, and they also showed how IV can be used to approximate the range of variations of return to schooling in Germany.
93 citations
TL;DR: The authors explored whether the absence of school sanitation infrastructure impedes educational attainment, particularly among pubescent-age girls, using a national Indian school latrine construction initiative and administrative school-level data.
Abstract: I explore whether the absence of school sanitation infrastructure impedes educational attainment, particularly among pubescent-age girls, using a national Indian school latrine construction initiative and administrative school-level data. School latrine construction substantially increases enrollment of pubescent-age girls, though predominately when providing sex-specific latrines. Privacy and safety appear to matter sufficiently for pubescent-age girls that only sex-specific latrines reduce gender disparities. Any latrine substantially benefits younger girls and boys, who may be particularly vulnerable to sickness from uncontained waste. Academic test scores did not increase following latrine construction, however. Estimated increases in enrollment are similar across the substantial variation in Indian district characteristics.
93 citations