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Actual and Potential Returns to Schooling in Spain

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  • Carmen Garcia Prieto
  • Angel Martin Roman
  • Carlos Perez Dominguez

Abstract

The returns to formal schooling in Spain are estimated in this paper. The main difference between this and previous papers on this subject is that, here, a distinction is made between the increase in the worker's potential maximum wage due to schooling and the actual registered increase. This difference (or underpayment) can be justified on the basis of job search theory. We use the stochastic frontiers technique because it allows the estimation of variables (such as the potential wage) that cannot be directly observed. One of the main results of this paper is that formal schooling clearly increases a worker's potential maximum wage. This increase is particularly noticeable for those workers who have completed at least a five-year university program. It has also been estimated that schooling increases the degree of underpayment, which is also quite relevant in the case of long-term university education. In spite of this, the effect of formal schooling on actual wages is clearly positive.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Education Economics.

Volume (Year): 13 (2005)
Issue (Month): 4 ()
Pages: 387-407

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Handle: RePEc:taf:edecon:v:13:y:2005:i:4:p:387-407

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Related research

Keywords: Human capital; wage; stochastic frontiers;

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References

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  1. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  2. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2002. "A Matching Model Of Crowding-Out And On-The- Job Search (With An Application To Spain)," Economics Working Papers we022809, Universidad Carlos III, Departamento de Economía.
  3. Polachek, Solomon W. & Robst, John, 1998. "Employee labor market information: comparing direct world of work measures of workers' knowledge to stochastic frontier estimates," Labour Economics, Elsevier, vol. 5(2), pages 231-242, June.
  4. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
  5. Hofler, Richard A & Murphy, Kevin J, 1992. "Underpaid and Overworked: Measuring the Effect of Imperfect Information on Wages," Economic Inquiry, Western Economic Association International, vol. 30(3), pages 511-29, July.
  6. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  7. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  8. Sara de la Rica & Arantza Ugidos, 1995. "¿Son las diferencias en capital humano determinantes en las diferencias salariales observadas entre hombres y mujeres?," Investigaciones Economicas, Fundación SEPI, vol. 19(3), pages 395-414, September.
  9. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
  10. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-68, September.
  11. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
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Cited by:
  1. Yeo Khee Yong & Toh Mun Heng & Shandre Mugan Thangavelu & James Wong, 2007. "Premium on Fields of Study : The Returns to Higher Education in Singapore," Microeconomics Working Papers 21921, East Asian Bureau of Economic Research.
  2. Yeo Khee Yong & Toh Mun Heng & Shandre Mugan Thangavelu & James Wong, 2007. "Premium on Fields of Study: The Returns to Higher Education in Singapore," SCAPE Policy Research Working Paper Series 0703, National University of Singapore, Department of Economics, SCAPE.

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