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Economic Returns to Education in France: OLS and Instrumental Variable Estimations

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  • Sajjad Haider Bhatti

    ()
    (Institut de Recherche sur l’Éducation: Sociologie et Économie de l’Éducation (IREDU), Université de Bourgogne, Dijon, France.)

  • Jean Bourdon

    ()
    (Directeur de recherche émérite au CNRS, Institut de Recherche sur l’Éducation: Sociologie et Économie de l’Éducation (IREDU), Université de Bourgogne, Dijon, France.)

  • Muhammad Aslam

    ()
    (Assistant Professor, Department of Statistics , Bahauddin Zakariya University, Multan, Pakistan.)

Abstract

This article estimates the economic returns to schooling as well as analyzing other explanatory factors for the French labor market. It addresses the issue of endogeneity bias and proposes two new instruments for use in the instrumental variable two-stage least squares technique. Our results show that the proposed instruments are relevant and adequate, based on evidence from the available literature. After using the proposed instruments, we find that the OLS coefficients for schooling are biased downwards. Finally, we choose between the two proposed instruments.

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Bibliographic Info

Article provided by Department of Economics, The Lahore School of Economics in its journal Lahore Journal of Economics.

Volume (Year): 18 (2013)
Issue (Month): 2 (July-Dec)
Pages: 51-63

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Handle: RePEc:lje:journl:v:18:y:2013:i:2:p:51-63

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Keywords: Endogeneity bias; instrumental variable; Mincerian model; two-stage least squares; wage regression; France.;

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References

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  1. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," NBER Working Papers 4483, National Bureau of Economic Research, Inc.
  2. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December.
  3. Ashenfelter, O. & Harmon, C. & Oosterbeek, H., 1999. "A Review of Estimates of the Schooling/ Earnings Relationship, with tests for Publication Bias," Papers 99/20, College Dublin, Department of Political Economy-.
  4. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  5. Jacob A. Mincer, 1974. "Age and Experience Profiles of Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 64-82 National Bureau of Economic Research, Inc.
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  7. Alan Krueger & Orley Ashenfelter, 1992. "Estimates of the Economic Return to Schooling from a New Sample of Twins," NBER Working Papers 4143, National Bureau of Economic Research, Inc.
  8. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  9. Véronique Simonnet, 1996. "Mobilité professionnelle et salaire : des différences entre hommes et femmes," Économie et Statistique, Programme National Persée, vol. 299(1), pages 59-71.
  10. Denis FOUGÈRE & Dominique GOUX & Éric MAURIN, 2001. "Formation continue et carrières salariales. Une évaluation sur données individuelles," Annales d'Economie et de Statistique, ENSAE, issue 62, pages 49-69.
  11. Angrist, Joshua D & Krueger, Alan B, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 979-1014, November.
  12. 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.
  13. McKinley L. Blackburn & David Neumark, 1991. "Omitted-Ability Bias and the Increase in the Return to Schooling," NBER Working Papers 3693, National Bureau of Economic Research, Inc.
  14. Nigel Tomes, 1983. "Religion and the Rate of Return on Human Capital: Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 122-38, February.
  15. Brunello, Giorgio & Miniaci, Raffaele, 1999. "The economic returns to schooling for Italian men. An evaluation based on instrumental variables1," Labour Economics, Elsevier, vol. 6(4), pages 509-519, November.
  16. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
  17. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  18. Flabbi, Luca & Paternostro, Stefano & Tiongson, Erwin R., 2007. "Returns to education in the economic transition : a systematic assessment using comparable data," Policy Research Working Paper Series 4225, The World Bank.
  19. Ismail, Ramlee, 2007. "The Impact of Schooling Reform on Returns to Education in Malaysia," MPRA Paper 15021, University Library of Munich, Germany, revised 29 Jan 2008.
  20. Barry R. Chiswick, 1983. "The Earnings and Human Capital of American Jews," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 313-336.
  21. Jean-Michel Plassard & Rachid Boumahdi, 1992. "Note à propos du caractère endogène de la variable éducation dans la fonction de gains," Revue Économique, Programme National Persée, vol. 43(1), pages 145-156.
  22. Tansel, A., 1992. "Wage Employment, Earnings and Returns to Schooling for Men and Women in Turkey," Papers 661, Yale - Economic Growth Center.
  23. Ali Skalli & Mahmood Araï & Gérard Ballot, 1996. "Différentiels intersectoriels de salaire et caractéristiques des employeurs en France," Économie et Statistique, Programme National Persée, vol. 299(1), pages 37-58.
  24. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, October.
  25. Jean-Michel Plassard & Rachid Boumahdi, 1992. "Note à propos du caractère endogène de la variable éducation dans la fonction de gains," Revue économique, Presses de Sciences-Po, vol. 0(1), pages 145-156.
  26. Trostel, Philip & Walker, Ian & Woolley, Paul, 2002. "Estimates of the economic return to schooling for 28 countries," Labour Economics, Elsevier, vol. 9(1), pages 1-16, February.
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