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Post-Secondary Education in Canada: Can Ability Bias Explain the Earnings Gap Between College and University Graduates?

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Author Info

  • Caponi, Vincenzo

    ()
    (Ryerson University)

  • Plesca, Miana

    ()
    (University of Guelph)

Abstract

Using the Canadian General Social Survey we compute returns to post-secondary education relative to high-school. Unlike previous research using Canadian data, our dataset allows us to control for ability selection into higher education. We find strong evidence of positive ability selection into all levels of post-secondary education for men and weaker positive selection for women. Since the ability selection is stronger for higher levels of education, particularly for university, the difference in returns between university and college or trades education decreases slightly after accounting for ability bias. However, a puzzling large gap persists, with university-educated men still earning over 20% more than men with college or trades education. Moreover, contrary to previous Canadian literature that reports higher returns for women, we document that the OLS hourly wage returns to university education are the same for men and women. OLS returns are higher for women only if weekly or yearly wages are considered instead, because university-educated women work more hours than the average. Nevertheless, once we account for ability selection into post-secondary education, we generally find higher returns for women than for men for all wage measures as a result of the stronger ability selection for men.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2784.

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Length: 49 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2784

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Keywords: returns to university; returns to college; returns to trades; unobserved ability; selection bias;

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  7. 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.
  8. Plug, Erik & Vijverberg, Wim P., 2001. "Schooling, Family Background, and Adoption: Is it Nature or is it Nurture?," IZA Discussion Papers 247, Institute for the Study of Labor (IZA).
  9. Kane, Thomas J & Rouse, Cecilia Elena, 1995. "Labor-Market Returns to Two- and Four-Year College," American Economic Review, American Economic Association, vol. 85(3), pages 600-614, June.
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Cited by:
  1. Wen Fan, 2011. "Estimating the Return to College in Britain Using Regression and Propensity Score Matching," Working Papers 201119, School Of Economics, University College Dublin.
  2. Strawinski, Pawel, 2008. "Changes in return to higher education in Poland 1998-2005," MPRA Paper 9533, University Library of Munich, Germany.
  3. Strawinski, Pawel, 2008. "External Return to Education in Poland," MPRA Paper 11598, University Library of Munich, Germany.
  4. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30749, University Library of Munich, Germany, revised 06 May 2011.
  5. Sylvain Dessy & Safa Ragued, 2013. "Multidimensional Poverty Targeting," Cahiers de recherche 1340, CIRPEE.
  6. NAKABAYASHI, Masaki, 2011. "Acquired Skills and Learned Abilities: Wage Dynamics in Internal Labor Markets," ISS Discussion Paper Series (series F) f153, Institute of Social Science, The University of Tokyo, revised 13 Apr 2014.

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