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Measuring Heterogeneity in the Returns to Education in Norway Using Educational Reforms

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Author Info
Aakvik, Arild
Salvanes, Kjell G
Vaage, Kjell

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Abstract

The decision to continue education is complex, and is influenced by individual ability, financial constraints, family background, preferences, etc. Such factors, normally unobserved by the researcher, introduce endogeneity and heterogeneity problems into estimating the returns to education. In this Paper, these problems are addressed by estimating a comparative advantage model for schooling, in which the returns to education vary at different levels of education. The model requires that instruments must be specified at each level of education, and we suggest that different school reforms in Norway can serve as suitable instruments. In particular, we exploit the staged implementation of a major reform in the comprehensive school system in the 1960s. We find that the returns to education are strongly non-linear. In particular, we find that the returns to upper secondary school and shorter programs at regional colleges, together with master’s programs at universities, have high returns as measured by wages. Also, we find that the average treatment effect is surprisingly high for medium-length educations (up to two years of college education). This means that increasing the general level of education, which was the intention of the comprehensive school reform of the 1960s and of other school reforms, has the potential to generate a high return in wages, although we do not consider the cost to society. We also find that there is a substantial difference between the average treatment effect and the effect of treatment on the treated for bachelor’s and master’s degrees at universities.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4088.

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Date of creation: Oct 2003
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Handle: RePEc:cpr:ceprdp:4088

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  31. Raaum, Oddbjørn & Salvanes, Kjell G. & Sørensen, Erik Ø., 2003. "The Impact of a Primary School Reform on Educational Stratification: A Norwegian Study of Neighbour and School Mate Correlations," IZA Discussion Papers 953, Institute for the Study of Labor (IZA). [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tuomas Pekkarinen & Roope Uusitalo & Sari Pekkala, 2006. "Education Policy and Intergenerational Income Mobility: Evidence from the Finnish Comprehensive School Reform," IZA Discussion Papers 2204, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Sandra Black & Paul Devereux & Kjell Salvanes, 2004. "Why the apple doesn't fall far: understanding intergenerational transmission of human capital," Working Papers in Applied Economic Theory 2004-12, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  3. Tuomas Pekkarinen, 2005. "Gender Differences in Educational Attainment: Evidence on the Role of the Tracking Age from a Finnish Quasi-Experiment," IZA Discussion Papers 1897, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Dinand Webbink, 2004. "Returns to university education; Evidence from an institutional reform," CPB Discussion Papers 34, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  5. Jörn-Steffen Pischke & Till von Wachter, 2005. "Zero Returns to Compulsory Schooling in Germany: Evidence and Interpretation," IZA Discussion Papers 1645, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Elizabeth Cascio & Damon Clark & Nora Gordon, 2008. "Education and the Age Profile of Literacy into Adulthood," NBER Working Papers 14073, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Riphahn, Regina T., 2004. "The Enrollment Effect of Secondary School Fees in Post-War Germany," IZA Discussion Papers 1295, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Black, Sandra & Devereux, Paul J. & Salvanes, Kjell G, 2003. "Why the Apple Doesn't Fall: Understanding Intergenerational Transmission of Human Capital," CEPR Discussion Papers 4150, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Bratberg, Espen & Nilsen, Øivind A. & Vaage, Kjell, 2005. "Intergenerational Mobility: Trends Across the Earnings Distribution," IZA Discussion Papers 1517, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Raaum, Oddbjørn & Salvanes, Kjell G. & Sørensen, Erik Ø., 2003. "The Neighbourhood Is Not What It Used to Be," IZA Discussion Papers 952, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Raaum, Oddbjørn & Salvanes, Kjell G. & Sørensen, Erik Ø., 2003. "The Impact of a Primary School Reform on Educational Stratification: A Norwegian Study of Neighbour and School Mate Correlations," IZA Discussion Papers 953, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Christian N. Brinch, Bernt Bratsberg and Oddbjørn Raaum, 2008. "The Effects of an Upper Secondary Education Reform on the Attainment of Immigrant Youth," Discussion Papers 528, Research Department of Statistics Norway. [Downloadable!]
  13. Nilsen, Øivind Anti & Vaage, Kjell & Aakvik, Arild & Jacobsen, Karl, 2008. "Estimates of Intergenerational Elasticities Based on Lifetime Earnings," IZA Discussion Papers 3709, Institute for the Study of Labor (IZA). [Downloadable!]
  14. Machin, Stephen & Pelkonen, Panu & Salvanes, Kjell G., 2008. "Education and Mobility," IZA Discussion Papers 3845, Institute for the Study of Labor (IZA). [Downloadable!]
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