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Nature, Nurture And Market Conditions: Ability And Education In The Policy Evaluation Approach

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Author Info
Bernarda Zamora (Universidad de Alicante)
Eduard Gracia (Booz Allen Hamilton)

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Abstract

The present paper follows the rationality of the Human Capital Theory to explain the heterogeneity of returns to schooling in a policy evaluation model with the purpose of testing whether people are blocked in any way (credit constraints, uncertainty or other market environment conditions) when they make their schooling choices. The minimal assumption that abler people face lower costs of schooling guarantees the possibility of making the right choice in this framework. The empirical implications of the model are extended further from the properties of ordinary least squares and instrumental variable estimators and centred on predictions about the sign of different policy evaluation parameters (sorting gains and selection biases) and on the shape and variability of marginal returns to education. Within this framework, the paper revises the modern empirical literature on returns to schooling in combination with the theoretical literature on human capital. Empirical evidence for the U.S., shown by a binary choice model, supports the assumption. Evidence obtained from Spanish data in a sequential choice setting does not support the assumption.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2007-29.

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Length: 36 pages
Date of creation: Dec 2007
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2007-29

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Related research
Keywords: Ability gap; Schooling; Selection Models; Heterogeneity;

Find related papers by JEL classification:
C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - General
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
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. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October. [Downloadable!] (restricted)
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  2. Cunha, Flavio & Heckman, James J., 2007. "Identifying and Estimating the Distributions of Ex Post and Ex Ante Returns to Schooling," Labour Economics, Elsevier, vol. 14(6), pages 870-893, December. [Downloadable!] (restricted)
  3. Flavio Cunha & James J. Heckman, 2006. "A New Framework for the Analysis of Inequality," NBER Working Papers 12505, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Flavio Cunha & James J. Heckman & Salvador Navarro, 2005. "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," NBER Working Papers 11024, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
  6. Gema Zamarro, 2006. "Accounting For Heterogeneous Returns In Sequential Schooling Decisions," Working Papers wp2006_0609, CEMFI. [Downloadable!]
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  7. Taber, Christopher R, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 665-91, July.
  8. Tobias, Justin, 2004. "Are Returns to Schooling Concentrated Among the Most Able? A Semiparametric Analysis of the Ability-Earnings Relationships," Staff General Research Papers 12016, Iowa State University, Department of Economics.
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  9. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-46, December. [Downloadable!] (restricted)
  10. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January. [Downloadable!] (restricted)
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Cited by:
(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. María Dolores Furió & Vicente Meneu, 2009. "Expectations and Forward Risk Premium in the Spanish Power Market," Working Papers. Serie AD 2009-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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