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Using Geographic Variation in College Proximity to Estimate the Return to Schooling

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  • David Card

Abstract

A convincing analysis of the causal link between schooling and earnings requires an exogenous source of variation in education outcomes. This paper explores the use of college proximity as an exogenous determinant of schooling. Analysis of the NLS Young Men Cohort reveals that men who grew up in local labor markets with a nearby college have significantly higher education and earnings than other men. The education and earnings gains are concentrated among men with poorly-educated parents -- men who would otherwise stop schooling at relatively low levels. When college proximity is taken as an exogenous determinant of schooling the implied instrumental variables estimates of the return to schooling are 25-60% higher than conventional ordinary least squares estimates. Since the effect of a nearby college on schooling attainment varies by family background it is possible to test whether college proximity is a legitimately exogenous determinant of schooling. The results affirm that marginal returns to education among children of less-educated parents are as high and perhaps much higher than the rates of return estimated by conventional methods.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4483.

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Date of creation: Oct 1993
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Publication status: published as Aspects of Labour Economics: Essays in Honour of John Vanderkamp, edited by Louis Christofides, E. Kenneth Grant and Robert Swindinsky. University of Toronto Press, 1995
Handle: RePEc:nbr:nberwo:4483

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  1. Angrist, J.D. & Imbens, G.W., 1992. "Average Causal Response with Variable Treatment Intensity," Papers 9234, Tilburg - Center for Economic Research.
  2. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-73, December.
  3. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  4. Thomas J. Kane & Cecilia Rouse, 1993. "Labor Market Returns to Two- And Four-Year College: Is A Credit a Credit And Do Degrees Matter?," Working Papers 690, Princeton University, Department of Economics, Industrial Relations Section..
  5. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, Econometric Society, vol. 45(1), pages 1-22, January.
  6. Thomas J. Kane & Cecilia E. Rouse, 1993. "Labor Market Returns to Two- and Four-Year Colleges: Is a Credit a Credit and Do Degrees Matter?," NBER Working Papers 4268, National Bureau of Economic Research, Inc.
  7. repec:fth:prinin:311 is not listed on IDEAS
  8. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
  9. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
  10. Griliches, Zvi, 1976. "Wages of Very Young Men," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(4), pages S69-85, August.
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