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Returns to Schooling, Institutions and Heterogeneous Diploma Effects: An Expanded Mincerian Framework applied to Mexico

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Author Info
Mehta, Aashish (U of Wisconsin)
Villarreal, Hector J.

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Abstract

We hypothesize two sources for sheepskin effects--signaling, and diplomas tied to jobs with downwards rigid wages. These theories have implications for diploma effects not only in the first, but also the second moments of the Mincerian earnings distribution that we are able to identify using a flexible econometric specification. Idiosyncrasies in Mexican labor market and educational institutions offer a natural experiment on which to train this methodology and test these theories. Correcting for heterogeneity in diplomas, we find no evidence of sheepskin effects, except on graduation from primary school. We find compelling evidence that returns to education (in both moments) are linked with labor market institutions and job-specific diplomas in the manner we hypothesize. Our econometric structure corrects for sample selectivity due to unemployment and allows us to observe behavior on the quantity axis of a labor market segmented by sheepskin effects. We also analyze the covariates of hours worked which helps to explain observed patterns in hourly earnings.

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Paper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 465.

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Date of creation: Dec 2003
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Handle: RePEc:ecl:wisagr:465

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  1. Jaeger, David A & Page, Marianne E, 1996. "Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 733-40, November. [Downloadable!] (restricted)
  2. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 35-52, January. [Downloadable!] (restricted)
  3. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May. [Downloadable!] (restricted)
  4. Mwabu, Germano & Schultz, T Paul, 1996. "Education Returns across Quantiles of the Wage Function: Alternative Explanations for Returns to Education by Race in South Africa," American Economic Review, American Economic Association, vol. 86(2), pages 335-39, May. [Downloadable!] (restricted)
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  5. Arrow, Kenneth J., 1973. "Higher education as a filter," Journal of Public Economics, Elsevier, vol. 2(3), pages 193-216, July. [Downloadable!] (restricted)
  6. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April. [Downloadable!] (restricted)
  7. Belman, Dale & Heywood, John S, 1991. "Sheepskin Effects in the Returns to Education: An Examination on Women and Minorities," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 720-24, November. [Downloadable!] (restricted)
  8. Hungerford, Thomas & Solon, Gary, 1987. "Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 175-77, February. [Downloadable!] (restricted)
  9. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S227-52, October. [Downloadable!] (restricted)
  10. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
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  1. Savanti, Maria Paula & Patrinos, Harry Anthony, 2005. "Rising returns to schooling in Argentina, 1992-2002 : productivity or credentialism?," Policy Research Working Paper Series 3714, The World Bank. [Downloadable!]
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