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

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  • Mehta, Aashish

    (U of Wisconsin)

  • Villarreal, Hector J.

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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Bibliographic Info

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. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  2. 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.
  3. Riley, John G, 1979. "Testing the Educational Screening Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S227-52, October.
  4. 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.
  5. Arrow, Kenneth J., 1973. "Higher education as a filter," Journal of Public Economics, Elsevier, vol. 2(3), pages 193-216, July.
  6. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  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.
  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.
  9. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
  10. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
  11. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  12. 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.
  13. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
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Cited by:
  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.

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