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Education Policy Reform and the Return to Schooling from Instrumental Variables

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  • Denny, Kevin
  • Harmon, Colm

Abstract

This paper exploits an unusual policy reform that had the effect of reducing the direct cost of schooling in Ireland in the late 1960’s. This gave rise to an increased level of schooling but with effects that vary substantially across family background. This interaction of educational reform and family background generates a set of instrumental variables that are used to estimate the return to schooling allowing for the endogeneity of schooling. Using a standard Mincer type model we find a large and well-determined rate of return of around 12% which is substantially higher than the OLS estimates of around 7%.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2518.

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Date of creation: Jul 2000
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Handle: RePEc:cpr:ceprdp:2518

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Related research

Keywords: Earnings; Education; Instrumental Variables; Ireland;

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References

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  1. Kevin Denny & Colm Harmon & Sandra Redmond, 2000. "Functional literacy, educational attainment and earnings - evidence from the international adult literacy survey," IFS Working Papers W00/09, Institute for Fiscal Studies.
  2. Kling, Jeffrey R, 2001. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(3), pages 358-64, July.
  3. Meghir, Costas & Palme, Mårten, 1999. "Assessing the Effect of Schooling on Earnings Using a Social Experiment," Working Paper Series in Economics and Finance 313, Stockholm School of Economics.
  4. 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-.
  5. Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
  6. Callan, Tim & Harmon, Colm, 1999. "The economic return to schooling in Ireland," Labour Economics, Elsevier, vol. 6(4), pages 543-550, November.
  7. Callan, Tim & Wren, Anne, 1994. "Male-Female Wage Differentials: Analysis and Policy Issues," Research Series, Economic and Social Research Institute (ESRI), number GRS163, September.
  8. 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.
  9. Tussing, A. Dale, 1978. "Irish Educational Expenditures - Past, Present, and Future," Research Series, Economic and Social Research Institute (ESRI), number GRS92, September.
  10. repec:fth:prinin:425 is not listed on IDEAS
  11. Kakwani, Nanak, 1980. "On a Class of Poverty Measures," Econometrica, Econometric Society, vol. 48(2), pages 437-46, March.
  12. Kevin Denny & Colm Harmon & Dorren McMahon & Sandra Redmond, 1999. "Literacy and Education in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 30(3), pages 215-226.
  13. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, October.
  14. repec:fth:prinin:415 is not listed on IDEAS
  15. Joshua D. Angrist & Guido W. Imbens, 1995. "Average Causal Response with Variable Treatment Intensity," NBER Technical Working Papers 0127, National Bureau of Economic Research, Inc.
  16. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  17. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  18. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  19. Uusitalo, R. & Conneely, K., 1998. "Estimating Heterogeneous Treatment Effects in the Becker Schooling Model," University of Helsinki, Department of Economics 435, Department of Economics.
  20. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
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Citations

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Cited by:
  1. Seamus McGuinness, 2003. "University quality and labour market outcomes," Applied Economics, Taylor & Francis Journals, vol. 35(18), pages 1943-1955.
  2. Brunello, Giorgio & Fort, Margherita & Weber, Guglielmo, 2007. "“For One More Year with You”: Changes in Compulsory Schooling, Education and the Distribution of Wages in Europe," IZA Discussion Papers 3102, Institute for the Study of Labor (IZA).
  3. Empar Pons & Maria Teresa Gonzalo, 2001. "Returns to Schooling in Spain. How Reliable Are IV Estimates?," Working Papers 446, Queen Mary, University of London, School of Economics and Finance.
  4. Concetta, MENDOLICCHIO, 2006. "A Disaggregate Analysis of Private Returns to Education in Italy," Discussion Papers (ECON - Département des Sciences Economiques) 2006054, Université catholique de Louvain, Département des Sciences Economiques.
  5. Shandre Thangavelu & Hu Guangzhou, 2006. "Lessons from “Benchmark” Countries: Korea & Ireland," SCAPE Policy Research Working Paper Series 0614, National University of Singapore, Department of Economics, SCAPE.
  6. Andrea Mercatanti, 2008. "A likelihood-based analysis for relaxing the exclusion restriction in randomized experiments with imperfect compliance," Temi di discussione (Economic working papers) 683, Bank of Italy, Economic Research and International Relations Area.
  7. Angel de la Fuente, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 576.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  8. Shandre M. Thangavelu & Hu Guangzhou, 2006. "Lessons from "benchmark" countries : Korea & Ireland," Labor Economics Working Papers 21820, East Asian Bureau of Economic Research.
  9. Chris Sakellariou, 2006. "Education policy reform, local average treatment effect and returns to schooling from instrumental variables in the Philippines," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 473-481.
  10. Tjaša Bartolj & Aleš Ahcan & Aljoša Feldinb & Sašo Polanec, 2012. "Evolution of Private Returns to Tertiary Education during Transition: Evidence from Slovenia," LICOS Discussion Papers 31412, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  11. Deng, Binbin, 2010. "Schooling and Wage Revisited: Does Higher IQ Really Give You Higher Income?," MPRA Paper 23206, University Library of Munich, Germany.

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