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The Long-Term Spillover Effects of Changes in the Return to Schooling

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  • Ran Abramitzky
  • Victor Lavy
  • Santiago Pérez

Abstract

We study the short and long-term spillover effects of a pay reform that substantially increased the returns to schooling in Israeli kibbutzim. This pay reform, which induced kibbutz students to improve their academic achievements during high school, spilled over to non-kibbutz members who attended schools with these kibbutz students. In the short run, peers of kibbutz students improved their high school outcomes and shifted to courses with higher financial returns. In the medium and long run, peers completed more years of postsecondary schooling and increased their earnings. We discuss three main spillover channels: diversion of teachers’ instruction time towards peers, peer effects from improved schooling performance of kibbutz students, and the transmission of information about the returns to schooling. While each of these channels likely contributed to improving the outcomes of peers, we provide suggestive evidence that the estimates are more consistent with the effects operating mainly through transmission of information.

Suggested Citation

  • Ran Abramitzky & Victor Lavy & Santiago Pérez, 2018. "The Long-Term Spillover Effects of Changes in the Return to Schooling," NBER Working Papers 24515, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24515
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    2. Jakob Schwerter & Nicolai Netz & Nicolas Hubner, 2022. "Do school reforms shape study behavior at university? Evidence from an instructional time reform," Papers 2207.09843, arXiv.org.
    3. Chesney, Alexander J., 2022. "Should I get a master’s degree?," Economics of Education Review, Elsevier, vol. 91(C).
    4. Briana Ballis, 2021. "Does Peer Motivation Impact Educational Investments? Evidence From DACA," Working Papers 2021-027, Human Capital and Economic Opportunity Working Group.

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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