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Education, Health and Wages

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Author Info

  • James J. Heckman
  • John Eric Humphries
  • Greg Veramendi
  • Sergio S. Urzua

Abstract

This paper develops and estimates a model with multiple schooling choices that identifies the causal effect of different levels of schooling on health, health-related behaviors, and labor market outcomes. We develop an approach that is a halfway house between a reduced form treatment effect model and a fully formulated dynamic discrete choice model. It is computationally tractable and identifies the causal effects of educational choices at different margins. We estimate distributions of responses to education and find evidence for substantial heterogeneity in unobserved variables on which agents make choices. The estimated treatment effects of education are decomposed into the direct benefits of attaining a given level of schooling and indirect benefits from the option to continue on to further schooling. Continuation values are an important component of our estimated treatment effects. While the estimated causal effects of education are substantial for most outcomes, we also estimate a quantitatively important effect of unobservables on outcomes. Both cognitive and socioemotional factors contribute to shaping educational choices and labor market and health outcomes. We improve on LATE by identifying the groups affected by variations in the instruments. We find benefits of cognition on most outcomes apart from its effect on schooling attainment. The benefits of socioemotional skills on outcomes beyond their effects on schooling attainment are less precisely estimated.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19971.

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Date of creation: Mar 2014
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Handle: RePEc:nbr:nberwo:19971

Note: CH ED HC HE LS POL TWP
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References

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  1. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  2. Heckman, James J. & UrzĂșa, Sergio, 2010. "Comparing IV with structural models: What simple IV can and cannot identify," Journal of Econometrics, Elsevier, vol. 156(1), pages 27-37, May.
  3. Flavio Cunha & James Heckman & Susanne Schennach, 2010. "Estimating the technology of cognitive and noncognitive skill formation," CeMMAP working papers CWP09/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Cawley, John & Ruhm, Christopher J., 2011. "The Economics of Risky Health Behaviors," IZA Discussion Papers 5728, Institute for the Study of Labor (IZA).
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  7. Lex Borghans & Bart H.H. Golsteyn & James J. Heckman & John Eric Humphries, 2011. "Identification Problems in Personality Psychology," NBER Working Papers 16917, National Bureau of Economic Research, Inc.
  8. Comay, Yochanan & Melnik, A & Pollatschek, M A, 1973. "The Option Value of Education and the Optimal Path for Investment in Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 421-35, June.
  9. Gianluca Violante & Giovanni Gallipoli & Costas Meghir, 2005. "Education Decisions, Equilibrium Policies and Wages Dispersion," 2005 Meeting Papers 522, Society for Economic Dynamics.
  10. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Gianluca Violante, 2013. "Education Policy and Intergenerational Transfers in Equilibrium," Working Papers 2013-010, Human Capital and Economic Opportunity Working Group.
  11. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
  12. Peter Arcidiacono & Patrick J. Bayer & Jason R. Blevins & Paul Ellickson, 2010. "Estimation of Dynamic Discrete Choice Models in Continuous Time," Working Papers 10-49, Duke University, Department of Economics.
  13. Scott Adams, 2002. "Educational Attainment and Health: Evidence from a Sample of Older Adults," Education Economics, Taylor & Francis Journals, vol. 10(1), pages 97-109.
  14. James J. Heckman & Salvador Navarro, 2005. "Dynamic Discrete Choice and Dynamic Treatment Effects," NBER Technical Working Papers 0316, National Bureau of Economic Research, Inc.
  15. Adriana Lleras-Muney, 2005. "The Relationship Between Education and Adult Mortality in the United States," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 189-221.
  16. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  17. Arendt, Jacob Nielsen, 2005. "Does education cause better health? A panel data analysis using school reforms for identification," Economics of Education Review, Elsevier, vol. 24(2), pages 149-160, April.
  18. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
  19. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding differences in health behaviors by education," Journal of Health Economics, Elsevier, vol. 29(1), pages 1-28, January.
  20. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding Differences in Health Behaviors by Education," Scholarly Articles 5344195, Harvard University Department of Economics.
  21. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January.
  22. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
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Cited by:
  1. Peter Hoeschler & Uschi Backes-Gellner, 2014. "College Dropout and Self-Esteem," Economics of Education Working Paper Series 0100, University of Zurich, Institute for Strategy and Business Economics (ISU).

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