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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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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.
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TL;DR: This article found no significant evidence that the mean return to a degree dropped in response to this large increase in the flow of graduates, however, they do find quite large falls in returns when they compare the cohorts that went to university before and after the recent rapid expansion of HE.
Abstract: This paper provides findings from the UK Labour Force Surveys from 1996 to 2003 on the financial private returns to a degree – the “college premium”. The data covers a decade when the university participation rate doubled – yet we find no significant evidence that the mean return to a degree dropped in response to this large increase in the flow of graduates. However, we do find quite large falls in returns when we compare the cohorts that went to university before and after the recent rapid expansion of HE. The evidence is consistent with the notion that new graduates are a close substitute for recent graduates but poor substitutes for older graduates. There appears to have been a very recent increase in the number of graduates getting “non-graduate” jobs but, conditional on getting a graduate job the returns seem stable. Our results are consistent across almost all degree subjects. – the exception being maths and engineering where we find that for men, and especially for women, there is a large increase in the proportion with maths and engineering degrees getting graduate jobs and that, conditional on this, the return is rising.
69 citations
TL;DR: The authors surveys empirical studies in labor economics, economics of education and occupational psychology to assess the empirical strength of the links between these sets of variables, finding that cognitive and non-cognitive abilities are relevant for economic success but make a modest contribution.
Abstract: Starting out from a simple conceptual framework running from initial individual abilities to skills produced in school to the utilization of these skills in the labor market, this paper surveys empirical studies in labor economics, economics of education and occupational psychology to assess the empirical strength of the links between these sets of variables. Cognitive and non-cognitive abilities are relevant for economic success, but make a modest contribution. Occupational psychology is complementary to economics and supports the notion of interlocking heterogeneity of individuals and jobs.
69 citations
TL;DR: This paper derived nonparametric bounds for local average treatment effects without imposing the exclusion restriction assumption or requiring an outcome with bounded support, and employed assumptions requiring weak monotonicity of mean potential and counterfactual outcomes within or across subpopulations defined by the values of the potential treatment status under each value of the instrument.
Abstract: We derive nonparametric bounds for local average treatment effects (LATE) without imposing the exclusion restriction assumption or requiring an outcome with bounded support. Instead, we employ assumptions requiring weak monotonicity of mean potential and counterfactual outcomes within or across subpopulations defined by the values of the potential treatment status under each value of the instrument. The key element in our derivation is a result relating LATE to a causal mediation effect, which allows us to exploit partial identification results from the causal mediation analysis literature. The bounds are employed to analyze the effect of attaining a GED, high school, or vocational degree on future labor market outcomes using randomization into a training program as an invalid instrument. The resulting bounds are informative, indicating that the local effect when assigned to training for those whose degree attainment is affected by the instrument is at most 12.7 percentage points on employment and $64.4 o...
69 citations
03 Feb 2011
TL;DR: In this article, the interplay of education and inequality along two related dimensions is considered, with inequalities in education across family background, gender, race, and ethnicity outlined and quantified, indicating that educational opportunities have an important role in improving individuals' life chances.
Abstract: This article considers the interplay of education and inequality along two related dimensions. First, the extent to which education is unequally distributed through the population is discussed; with inequalities in education across family background, gender, race, and ethnicity outlined and quantified. The next section reviews the inequalities in earnings and employment probabilities that are associated with differences in education. They are shown to be substantial, indicating that educational opportunities have an important role in improving individuals' life chances. © 2010 Elsevier Ltd. All rights reserved.
69 citations