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Estimating the Return to Endogenous Schooling Decisions for Australian Workers via Conditional Second Moments

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Author Info

  • Klein, Roger

    () (Rutgers University)

  • Vella, Francis

    () (Georgetown University)

Abstract

This paper employs conditional second moments to identify the impact of education in wage regressions where education is treated as endogenous. This approach avoids the use of instrumental variables in a setting where instruments are frequently not available. We employ this methodology to estimate the returns to schooling for a sample of Australian workers. We find that accounting for the endogeneity of education in this manner increases the estimated return to education from 6 percent to 10 percent.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2407.

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Length: 31 pages
Date of creation: Oct 2006
Date of revision:
Publication status: published as 'Estimating the Return to Endogenous Schooling Decisions via Conditional Second Moments' in : Journal of Human Resources, 2009, 44 (4), 1047 - 1065
Handle: RePEc:iza:izadps:dp2407

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Related research

Keywords: endogeneity; returns to schooling; heteroskedasticity;

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References

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  1. Angrist, Joshua D & Krueger, Alan B, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 979-1014, November.
  2. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  3. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
  4. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
  5. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-73, December.
  6. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  7. Miller, Paul W & Mulvey, Charles & Martin, Nick, 1995. "What Do Twins Studies Reveal about the Economic Returns to Education? A Comparison of Australian and U.S. Findings," American Economic Review, American Economic Association, vol. 85(3), pages 586-99, June.
  8. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  9. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
  10. Rummery, Sarah & Vella, Francis & Verbeek, Marno, 1999. "Estimating the returns to education for Australian youth via rank-order instrumental variables," Labour Economics, Elsevier, vol. 6(4), pages 491-507, November.
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Citations

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Cited by:
  1. Francis Vella & Lídia Farré & Roger Klein, 2008. "A Parametric Control Function Approach to Estimating the Returns to Schooling in the Absence of Exclusion Restrictions: An Application to the NLSY," Working Papers. Serie AD 2008-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Deng, Binbin, 2010. "Schooling and Wage Revisited: Does Higher IQ Really Give You Higher Income?," MPRA Paper 23206, University Library of Munich, Germany.
  3. Martine Mariotti & Juergen Meinecke, 2011. "Bounds on the Return to Education in Australia using Ability Bias," ANU Working Papers in Economics and Econometrics 2011-551, Australian National University, College of Business and Economics, School of Economics.
  4. Patrick Laplagne & Maurice Glover & Anthony Shomos, 2007. "Effects of Health and Education on Labour Force Participation," Staff Working Papers 0704, Productivity Commission, Government of Australia.

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