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Interpreting Degree Effects in the Returns to Education

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Author Info
Flores-Lagunes, Alfonso () (University of Florida)
Light, Audrey () (Ohio State University)
Abstract

Researchers often identify degree effects by including degree attainment (D) and years of schooling (S) in a wage model, yet the source of independent variation in these measures is not well understood. We argue that S is negatively correlated with ability among degree-holders because the most able graduate the fastest, while a positive correlation exists among dropouts because the most able benefit from increased schooling. Using data from the NLSY79, we find support for this explanation, and we reject the notion that the independent variation in S and D reflects reporting error.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4169.

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Date of creation: May 2009
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Handle: RePEc:iza:izadps:dp4169

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Related research
Keywords: returns to education; degree effects;

Find related papers by JEL classification:
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  23. Rouse, Cecilia Elena, 1995. "Democratization or Diversion? The Effect of Community Colleges on Educational Attainment," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 217-24, April.
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  27. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35. [Downloadable!]
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