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Causal Returns to Schooling and Individual Heterogeneity

Author

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  • Friedhelm PFEIFFER

    (Centre for European Economics Research (ZEW), L7, 1; 68161,Mannheim,Germany)

  • Winfried POHLMEIER

    (University of Konstanz, Department of Economics, Box D 124; 78457, Konstanz, Germany,)

Abstract

In this paper, human capital investments are evaluated by assuming heterogeneous returns to schooling. We use the potential outcome approach to measure the causal effect of human capital investments on earnings as a continuous treatment effect. Empirical evidence is based on a sample of West German full-time employed males (BIBB/IAB survey on educational and vocational attainment and career 1998/99). Our estimate of the average partial effect (APE) of an additional year of schooling amounts to 8.7%, which is higher than OLS estimates and quite similar to conventional instrumental variable estimates.

Suggested Citation

  • Friedhelm PFEIFFER & Winfried POHLMEIER, 2011. "Causal Returns to Schooling and Individual Heterogeneity," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 29-41, December.
    • Handle: RePEc:aic:revebs:y:2011:i:8:pfeifferf
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    1. James Heckman & Edward Vytlacil, 1998. "Instrumental Variables Methods for the Correlated Random Coefficient Model: Estimating the Average Rate of Return to Schooling When the Return is Correlated with Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 974-987.
    2. Michael Gebel & Friedhelm Pfeiffer, 2010. "Educational Expansion and Its Heterogeneous Returns for Wage Workers," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 19-42.
    3. Flossmann Anton L. & Pohlmeier Winfried, 2006. "Causal Returns to Education: A Survey on Empirical Evidence for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(1), pages 6-23, February.
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    6. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    7. Blechinger, Doris & Pfeiffer, Friedhelm, 1996. "Technological change and skill obsolescence: the case of German apprenticeship training," ZEW Discussion Papers 96-15, ZEW - Leibniz Centre for European Economic Research.
    8. Felix Büchel & Andries de Grip & Antje Mertens (ed.), 2003. "Overeducation in Europe," Books, Edward Elgar Publishing, number 3054.
    9. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
    10. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863, Elsevier.
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    Cited by:

    1. Pfeiffer Friedhelm & Stichnoth Holger, 2015. "Fiskalische und individuelle Bildungsrenditen – aktuelle Befunde für Deutschland," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 393-411, December.
    2. Patrinos, Harry A., 2022. "Returns to Education in Greece: Evidence from the 1977 Labor Market Survey Using the Greek Civil War as an Instrument," IZA Discussion Papers 15541, Institute of Labor Economics (IZA).
    3. Pfeiffer, Friedhelm & Stichnoth, Holger, 2018. "Fiskalische und individuelle Nettoerträge und Renditen von Bildungsinvestitionen im jungen Erwachsenenalter," ZEW Discussion Papers 18-043, ZEW - Leibniz Centre for European Economic Research.
    4. Victor Iturra & Mauricio Sarrias, 2023. "Amenities and individual heterogeneity in the return to schooling," Letters in Spatial and Resource Sciences, Springer, vol. 16(1), pages 1-15, December.
    5. Mohrenweiser, Jens & Pfeiffer, Friedhelm, 2016. "Zur Entwicklung der studienspezifischen Selbstwirksamkeit in der Oberstufe," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 49(1), pages 77-95.
    6. Heigle, Julia & Pfeiffer, Friedhelm, 2020. "Langfristige Wirkungen eines nicht abgeschlossenen Studiums auf individuelle Arbeitsmarktergebnisse und die allgemeine Lebenszufriedenheit," ZEW Discussion Papers 20-004, ZEW - Leibniz Centre for European Economic Research.
    7. Lange, Martin & Pfeiffer, Friedhelm & Berg, Gerard J. van den, 2017. "Integrating young male refugees : initial evidence from an inclusive soccer project," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 51(1), pages 1-6.
    8. Berg, Gerard van den & Kolb, Michael & Lange, Martin & Pfeiffer, Friedhelm, 2016. "Integrating refugees in the Rhine-Neckar-Region: Initial evidence from an inclusive soccer project," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 149872.
    9. Kruppe, Thomas & Mühlhan, Jannek & Weber, Enzo & Wiemers, Jürgen, 2019. "Gesamtfiskalische Wirkungen von Weiterbildungsförderung: Öffentliche Ausgaben generieren hohe Rückflüsse," IAB-Kurzbericht 201908, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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