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. They are identified under assumptions weaker than typical exclusion restrictions used in the context of classical instrumental variables analysis. In our application for the U.K., we relate levels of expected wages to unobserved ability, measured ability, family background, type of secondary school, and the decision whether to attend college.
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Bibliographic InfoPaper provided by JEPS in its series JEPS Working Papers with number 06-001.
Length: 27 pages
Date of creation: Feb 2006
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Returns to college education; correlated random coefficient model; local instrumental variables; local linear regression;
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.
- Klein, Tobias J., 2007. "College Education and Wages in the U.K.: Estimating Conditional Average Structural Functions in Nonadditive Models with Binary Endogenous Variables," IZA Discussion Papers 2761, Institute for the Study of Labor (IZA).
- 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-2006-03-11 (All new papers)
- NEP-ECM-2006-03-11 (Econometrics)
- NEP-EDU-2006-03-11 (Education)
- NEP-HRM-2006-03-11 (Human Capital & Human Resource Management)
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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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