Using Unemployment Rates as Instruments to Estimate Returns to Schooling
AbstractI use state unemployment rates during a person’s teenage years to estimate the returns to schooling. A higher unemployment rate reduces the opportunity costs of attending school. Using the same 1980 Census data set that Angrist and Krueger (1991) use, I also estimate returns to schooling with a modified version of their quarter-of-birth instrument. The estimates from the two-stage least squares (2SLS) model using the unemployment rate and the model using the quarter-of-birth instruments are almost identical. In addition, these 2SLS estimates are larger than the ordinary least squares (OLS) estimates, supporting this counterintuitive, yet prevalent, result in the literature.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 76 (2010)
Issue (Month): 3 (January)
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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- Jacopo Mazza & Hans van Ophem & Joop Hartog, 2011. "Unobserved Heterogeneity and Risk in Wage Variance: Does Schooling provide Earnings Insurance?," Tinbergen Institute Discussion Papers 11-045/3, Tinbergen Institute.
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