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Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems

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  • David Card

Abstract

This paper reviews a set of recent studies that have attempted to measure the causal effect of education on labor market earnings by using institutional features of the supply side of the education system as exogenous determinants of schooling outcomes. A simple theoretical model that highlights the role of comparative advantage in the optimal schooling decision is presented and used to motivate an extended discussion of econometric issues, including the properties of ordinary least squares and instrumental variables estimators. A review of studies that have used compulsory schooling laws, differences in the accessibility of schools, and similar features as instrumental variables for completed education reveals that the resulting estimates of the return to schooling are typically as big or bigger than the corresponding ordinary least squares estimates. One interpretation of this finding is that marginal returns to education among the low-education subgroups typically affected by supply-side innovations tend to relatively high, reflecting their high marginal costs of schooling, rather than low ability that limits their return to education.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7769.

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Date of creation: Jun 2000
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Handle: RePEc:nbr:nberwo:7769

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  1. Thomas Lemieux & David Card, 2001. "Education, earnings, and the "Canadian G.I. Bill"," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 313-344, May.
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  9. Ichino, Andrea & Winter-Ebmer, Rudolf, 1998. "The Long-Run Educational Cost of World War II: An Example of Local Average Treatment Effect Estimation," CEPR Discussion Papers 1895, C.E.P.R. Discussion Papers.
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  29. Joshua D. Angrist & Kathryn Graddy & Guido W. Imbens, 1995. "Non-Parametric Demand Analysis with an Application to the Demand for Fish," NBER Technical Working Papers 0178, National Bureau of Economic Research, Inc.
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  32. Henry S. Farber & Jeffrey R. Kling & Alan Krueger, 1999. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," Working Papers 794, Princeton University, Department of Economics, Industrial Relations Section..
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  34. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
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  36. repec:fth:prinin:415 is not listed on IDEAS
  37. Ichino, A. & Winter-Ebmer, R., 1998. "The Long-Run Education Cost of World War II. Example of Local Average Treatment Effect Estimation," Economics Working Papers eco98/10, European University Institute.
  38. 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..
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  1. More on the returns to education
    by Tyler Cowen in Marginal Revolution on 2011-06-28 08:15:28
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