On the Sensitivity of Return to Schooling Estimates to Estimation Methods, Model Specification, and Influential Outliers If Identification Is Weak
AbstractWe provide a comparison of return to schooling estimates based on an influential study by Angrist and Krueger (1991) using two stage least squares (TSLS), limited information maximum likelihood (LIML), jackknife (JIVE), and split sample instrumental variables (SSIV) estimation. We find that the estimated return to education is quite sensitive to the age controls used in the models as well as the estimation method used. In particular, we provide evidence that JIVE coefficients' standard errors are inflated by a group of extreme years of education observations, for which identification is especially weak. We propose to use Cook's Distance in order to identify influential outliers having substantial influence on first-stage JIVE coefficients and fitted values.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3961.
Length: 25 pages
Date of creation: Jan 2009
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Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: 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-2009-02-14 (All new papers)
- NEP-ECM-2009-02-14 (Econometrics)
- NEP-EDU-2009-02-14 (Education)
- NEP-LAB-2009-02-14 (Labour Economics)
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