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The causal effect of education on earnings
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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.read more
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Education and wages in the Czech and Slovak Republics during transition
Randall K. Filer,Randall K. Filer,Randall K. Filer,Štěpán Jurajda,Štěpán Jurajda,Ján Plánovský +5 more
TL;DR: In this article, an employer-based sample of over 400,000 Czech and 125,000 Slovak men was used to estimate the benefits of education in 1995-1997 and found that education of all types had become substantially more highly rewarded in both countries than it was either under communism or in the early years of the transition.
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