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K-Returns to Education

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  • Guiso, Luigi
  • Pistaferri, Luigi
  • Fagereng, Andreas
  • Blomhoff Holm, Martin

Abstract

We exploit a school reform that increased the length of compulsory schooling in Norway in the 1960s to study the causal effect of formal general education on returns on wealth (k-returns). OLS estimates reveal a strong, positive and statistically significant correlation between education and returns on individual net worth. This effect disappears in IV regressions, implying that general education has no causal effect on individual performance in capital markets, whose heterogeneity largely reflects non-acquired ability. On the contrary, we find that education causes higher returns in the labor market (l-returns). We speculate about possible rationales for this important asymmetry.

Suggested Citation

  • Guiso, Luigi & Pistaferri, Luigi & Fagereng, Andreas & Blomhoff Holm, Martin, 2020. "K-Returns to Education," CEPR Discussion Papers 14310, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14310
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    More about this item

    Keywords

    Returns to education; Returns to capital;

    JEL classification:

    • G0 - Financial Economics - - General
    • I0 - Health, Education, and Welfare - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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