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What determines the return to education: An extra year or hurdle cleared?

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  • Matt Dickson
  • Sarah Smith

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Abstract

The 1973 Raising of the School Leaving Age in England and Wales has been used to identify returns to years’ schooling. However, the reform affected the proportion with qualifications, as well as schooling length. To shed light on whether the returns reflect extra schooling or qualifications, we exploit another institutional rule – the Easter Leaving Rule – to obtain unbiased estimates of the effect of qualifications. We find sizeable returns to academic qualifications – increasing the probability of employment by 40 percentage points. This is more than 70% of the estimated return based on RoSLA, suggesting that qualifications drive most – but not all – of the returns to education.

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File URL: http://www.bristol.ac.uk/cmpo/publications/papers/2011/wp256.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 11/256.

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Length: 24 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:bri:cmpowp:11/256

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Keywords: Returns to education; RoSLA; qualifications;

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References

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  1. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  2. repec:ese:iserwp:2006-44 is not listed on IDEAS
  3. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2003. "Does education raise productivity, or just reflect it?," Working Papers 200304, School Of Economics, University College Dublin.
  4. Devereux, Paul J. & Hart, Robert A., 2008. "Forced to Be Rich? Returns to Compulsory Schooling in Britain," IZA Discussion Papers 3305, Institute for the Study of Labor (IZA).
  5. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2004. "Evaluating the Impact of Education on Earnings in the UK: Models, Methods and Results from the NCDS," CEE Discussion Papers 0047, Centre for the Economics of Education, LSE.
  6. Silles, Mary A., 2009. "The causal effect of education on health: Evidence from the United Kingdom," Economics of Education Review, Elsevier, vol. 28(1), pages 122-128, February.
  7. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2008. "Too Young to Leave the Nest: The Effects of School Starting Age," NBER Working Papers 13969, National Bureau of Economic Research, Inc.
  8. Claire Crawford & Lorraine Dearden & Costas Meghir, 2010. "When you are born matters: the impact of date of birth on educational outcomes in England," IFS Working Papers W10/06, Institute for Fiscal Studies.
  9. Damon Clark & Heather Royer, 2010. "The Effect of Education on Adult Health and Mortality: Evidence from Britain," NBER Working Papers 16013, National Bureau of Economic Research, Inc.
  10. Emilia Del Bono & Fernando Galindo-Rueda, 2007. "The Long Term Impacts of Compulsory Schooling: Evidence from a Natural Experiment in School Leaving Dates," CEE Discussion Papers 0074, Centre for the Economics of Education, LSE.
  11. Del Bono, Emilia & Galindo-Rueda, Fernando, 2004. "Do a Few Months of Compulsory Schooling Matter? The Education and Labour Market Impact of School Leaving Rules," IZA Discussion Papers 1233, Institute for the Study of Labor (IZA).
  12. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2005. "Evaluating the effect of education on earnings: models, methods and results from the National Child Development Survey," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 473-512.
  13. Devereux, Paul J. & Fan, Wen, 2011. "Earnings returns to the British education expansion," Economics of Education Review, Elsevier, vol. 30(6), pages 1153-1166.
  14. Lorraine Dearden, 1999. "Qualifications and earnings in Britain: how reliable are conventional OLS estimates of the returns to education?," IFS Working Papers W99/07, Institute for Fiscal Studies.
  15. Julien Grenet, 2013. "Is Extending Compulsory Schooling Alone Enough to Raise Earnings? Evidence from French and British Compulsory Schooling Laws," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(1), pages 176-210, 01.
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Cited by:
  1. Paul J Devereux & Wen Fan, 2011. "Earnings Returns to the British Education Expansion," Working Papers 201111, School Of Economics, University College Dublin.
  2. Colm Harmon, 2011. "Economic Returns to Education: What We Know, What We Don’t Know, and Where We Are Going – Some Brief Pointers," Working Papers 201115, Geary Institute, University College Dublin.
  3. Hart, Robert A & Moro, Mirko & Roberts, J Elizabeth, 2012. "Date of birth, family background, and the 11 plus exam: short- and long-term consequences of the 1944 secondary education reforms in England and W ales," Stirling Economics Discussion Papers 2012-10, University of Stirling, Division of Economics.
  4. Dickson, Matt & Gregg, Paul & Robinson, Harriet, 2013. "Early, Late or Never? When Does Parental Education Impact Child Outcomes?," IZA Discussion Papers 7123, Institute for the Study of Labor (IZA).

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