College Education and Wages in the U.K.: Estimating Conditional Average Structural Functions in Nonadditive Models with Binary Endogenous Variables
AbstractWe propose and implement an estimator for identifiable features of correlated random coefficient models with binary endogenous variables and nonadditive errors in the outcome equation. It is suitable, e.g., for estimation of the average returns to college education when they are heterogeneous across individuals and correlated with the schooling choice. The estimated features are of central interest to economists and are directly linked to the marginal and average treatment effect in policy evaluation. The advantage of the approach that is taken in this paper is that it allows for non-trivial selection patterns. Identification relies on assumptions weaker than typical functional form and exclusion restrictions used in the context of classical instrumental variables analysis. In the empirical application, we relate wage levels, wage gains from a college degree and selection into college to unobserved ability. Our results yield a deepened understanding of individual heterogeneity which is relevant for the design of educational policy.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2761.
Length: 38 pages
Date of creation: Apr 2007
Date of revision:
Publication status: published in: Empirical Economics [Online First]
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Other versions of this item:
- Tobias Klein, 2013. "College education and wages in the U.K.: estimating conditional average structural functions in nonadditive models with binary endogenous variables," Empirical Economics, Springer, vol. 44(1), pages 135-161, February.
- Tobias J. Klein, 2006. "College Education and Wages in the U.K.: Estimating Conditional Average Structural Functions in Nonadditive Models with Binary Endogenous Variables," JEPS Working Papers 06-001, JEPS.
- Klein, T.J., 2009. "College Education and Wages in the U.K.: Estimating Conditional Average Structural Functions in Nonadditive Models with Binary Endogenous Variables," Discussion Paper 2009-88, Tilburg University, Center for Economic Research.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-DCM-2007-05-12 (Discrete Choice Models)
- NEP-ECM-2007-05-12 (Econometrics)
- NEP-EDU-2007-05-12 (Education)
- NEP-HRM-2007-05-12 (Human Capital & Human Resource Management)
- NEP-LAB-2007-05-12 (Labour Economics)
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- Klein, Tobias J., 2007.
"Heterogeneous Treatment Effects: Instrumental Variables without Monotonicity?,"
IZA Discussion Papers
2738, Institute for the Study of Labor (IZA).
- Klein, Tobias J., 2010. "Heterogeneous treatment effects: Instrumental variables without monotonicity?," Journal of Econometrics, Elsevier, vol. 155(2), pages 99-116, April.
- Klein, T.J., 2008. "Heterogeneous Treatment Effects: Instrumental Variables Without Monotonicity?," Discussion Paper 2008-45, Tilburg University, Center for Economic Research.
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