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
Posted Content•
TL;DR: In this paper, an extensive summary and a critical discussion of the empirical literature on the impact of human capital on macroeconomic performance, with a particular focus on UK policy is presented.
Abstract: We offer an extensive summary and a critical discussion of the empirical literature on the impact of human capital on macro-economic performance, with a particular focus on UK policy. We also highlight methodological issues and make recommendations for future research priorities. Taking the studies as a whole, the evidence that human capital increases productivity is compelling, though still largely divided on whether the stock of education affects the long-run level or growth rate of GDP. A one-year increase in average education is found to raise the level of output per capita by between three and six percent according to augmented neo-classical specifications, while leading to an over one percentage point faster growth according to estimates from the new-growth theories. Still, over the short-run planning horizon (four years) the empirical estimates of the change in GDP are of similar orders of magnitude in the two approaches. The impact of increases at different levels of education appear to depend on the level of a country's development, with tertiary education being the most important for growth in OECD countries. Education is found to yield additional indirect benefits to growth. More preliminary evidence seems to indicate that type, quality and efficiency of education matter for growth too.
515 citations
Book•
01 Jun 1999TL;DR: The 1999 Annual World Bank Conference on Development Economics, the eleventh anniversary, was held at the Bank on April 28-30, 1999 as discussed by the authors, which focused on three trends of development: 1) the emerging international financial architecture; 2) challenges to social development; and 3) lessons from a decade of transition.
Abstract: The 1999 Annual World Bank Conference on Development Economics, the eleventh anniversary, was held at the Bank on April 28-30, 1999. The discussions focused on three trends of development: 1) the emerging international financial architecture; 2) challenges to social development; and 3) lessons from a decade of transition. Twelve papers were presented on a variety of topics including corporate governance, short-term capital flows, and the relationships between crime, violence, and inequitable development. The keynote addresses by Noble Laureate Kenneth Arrow, Secretary of the US Treasury Lawrence Summers, and Joseph E. Stiglitz, senior vice president, Development Economics and chief economist at the World Bank and former chair of the US Council of Economic Advisors, broach many of the topics that were central to the conference. They examine technological knowledge and innovation and global integration and look back at the arduous process of transition in the former Soviet Union.
500 citations
TL;DR: In this article, the authors study the crime reducing potential of education, presenting causal statistical estimates based upon a law that changed the compulsory school leaving age in England and Wales, and uncover significant decreases in property crime from reductions in the proportion of people with no educational qualifications and increases in the age of leaving school.
Abstract: In this article, we study the crime reducing potential of education, presenting causal statistical estimates based upon a law that changed the compulsory school leaving age in England and Wales. We frame the analysis in a regression-discontinuity setting and uncover significant decreases in property crime from reductions in the proportion of people with no educational qualifications and increases in the age of leaving school that resulted from the change in the law. The findings show that improving education can yield significant social benefits and can be a key policy tool in the drive to reduce crime.
490 citations
TL;DR: This article examined the case of Uganda, where rebel recruitment methods provided exogenous variation in conscription and found that schooling falls by nearly a year, skilled employment halves, and earnings drop by a third.
Abstract: Little is known about the impacts of military service on human capital and labor market outcomes due to an absence of data as well as sample selection: recruits are self-selected, screened, and selectively survive. We examine the case of Uganda, where rebel recruitment methods provide exogenous variation in conscription. Economic and educational impacts are widespread and persistent: schooling falls by nearly a year, skilled employment halves, and earnings drop by a third. Military service seems to be a poor substitute for schooling. Psychological distress is evident among those exposed to severe war violence and is not limited to ex-combatants.
485 citations
01 Jan 2006
TL;DR: In this article, the authors formalize the concepts of self-productivity and complementarity of human capital investments and use them to explain the evidence on skill formation, and provide a theoretical framework for interpreting the evidence from a vast empirical literature, for guiding the next generation of empirical studies, and for formulating policy.
Abstract: This paper presents economic models of child development that capture the essence of recent findings from the empirical literature on skill formation. The goal of this essay is to provide a theoretical framework for interpreting the evidence from a vast empirical literature, for guiding the next generation of empirical studies, and for formulating policy. Central to our analysis is the concept that childhood has more than one stage. We formalize the concepts of self-productivity and complementarity of human capital investments and use them to explain the evidence on skill formation. Together, they explain why skill begets skill through a multiplier process. Skill formation is a life cycle process. It starts in the womb and goes on throughout life. Families play a role in this process that is far more important than the role of schools. There are multiple skills and multiple abilities that are important for adult success. Abilities are both inherited and created, and the traditional debate about nature versus nurture is scientifically obsolete. Human capital investment exhibits both self-productivity and complementarity. Skill attainment at one stage of the life cycle raises skill attainment at later stages of the life cycle (self-productivity). Early investment facilitates the productivity of later investment (complementarity). Early investments are not productive if they are not followed up by later investments (another aspect of complementarity). This complementarity explains why there is no equity-efficiency trade-off for early investment. The returns to investing early in the life cycle are high. Remediation of inadequate early investments is difficult and very costly as a consequence of both self-productivity and complementarity.
482 citations