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Years and Intensity of Schooling Investing

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  • Arleen Leibowitz
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    Abstract

    An essential feature of schooling is not only that it occurs in a different site than most on-the-job training but also that it is more intensive. That is, a smaller proportion of gross potential earnings is sacrificed in on-the-job training than in schooling. In estimating human capital earnings functions it has generally been assumed that during schooling 100% of gross potential earnings are invested in all years, while in on-the-job training this percentage is smaller and is a declining function of age. This assumption has been quite useful since it allows the identification of an estimate of the rate of return on schooling from a regression of earnings on years of schooling. This paper argues that the percentage of gross earnings invested may fall below 100% well before schooling is ended, that this percentage is likely to be correlated with years of schooling, and thus this procedure yields only a biased estimate of the rate of return to schooling.

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    File URL: http://www.nber.org/papers/w0049.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0049.

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    Date of creation: Aug 1974
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    Publication status: published as American Economic Review, Vol. 66, no. 3 (1976): 321-334.
    Handle: RePEc:nbr:nberwo:0049

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    1. Hause, John C, 1972. "Earnings Profile: Ability and Schooling," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S108-S38, Part II, .
    2. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S74-S103, Part II, .
    3. Lee A. Lillard, 1973. "Human Capital Life Cycle of Earnings Models: A Specific Solution and Estimation," NBER Working Papers 0004, National Bureau of Economic Research, Inc.
    4. Jacob Mincer & Solomon Polachek, 1974. "Family Investments in Human Capital: Earnings of Women," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 76-110 National Bureau of Economic Research, Inc.
    5. Lewis C. Solmon, 1973. "The Definition and Impact of College Quality," NBER Working Papers 0007, National Bureau of Economic Research, Inc.
    6. Jacob Mincer & Solomon Polacheck, 1974. "Family Investments in Human Capital: Earnings of Women," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 397-431 National Bureau of Economic Research, Inc.
    7. Johnson, Thomas, 1970. "Returns from Investment in Human Capital," American Economic Review, American Economic Association, vol. 60(4), pages 546-60, September.
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