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Educational Expansion and Its Heterogeneous Returns for Wage Workers

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  • Michael Gebel
  • Friedhelm Pfeiffer

Abstract

This paper examines the evolution of returns to education in the West German labour market over the last two decades. During this period, graduates from the period of educational expansion entered the labour market and an upgrading of the skill structure took place. In order to tackle the issues of endogeneity of schooling and its heterogeneous returns we apply two estimation methods: Wooldridge's (2004) approach that relies on conditional mean independence and Garen's (1984) control function approach that requires an exclusion restriction. For the population of workers from the SOEP, we find that both approaches produce estimates of average returns to education that decrease until the late 1990s and increase afterwards. The gender gap in returns to education seems to vanish. Furthermore, we find that the so-called "baby boomer" cohort has the lowest average return to education in young ages. However, this effect disappears over time.

Suggested Citation

  • Michael Gebel & Friedhelm Pfeiffer, 2007. "Educational Expansion and Its Heterogeneous Returns for Wage Workers," SOEPpapers on Multidisciplinary Panel Data Research 13, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp13
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    More about this item

    Keywords

    Returns to Education; Human Capital; Skill Upgrading; Wage Work;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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