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Returns to Schooling in Spain. How Reliable Are IV Estimates?

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  • Empar Pons

    ()
    (Universidad de Valencia)

  • Maria Teresa Gonzalo

    (Universidad de Valencia)

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    Abstract

    This paper studies the Ordinary Least-Squared (OLS) and Instrumental Variables (IV) estimates of the returns to schooling for male workers in Spain. OLS estimates are often biased due to the endogeneity of schooling, measurement errors or omitted variables. Proper IV estimates correct this bias. The reliability of family background, natural experiments (based on changes in the education system and season of birth) and the availability of a college in the province is checked using Spanish data. The results suggest that background and college availability are valid instruments and that the IV estimates of the returns to schooling are higher than OLS estimates. These results are in line with the majority of previous results in the literature.

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    File URL: http://www.econ.qmul.ac.uk/papers/doc/wp446.pdf
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    Bibliographic Info

    Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 446.

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    Date of creation: Nov 2001
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    Handle: RePEc:qmw:qmwecw:wp446

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    Keywords: Returns to schooling; Instrumental Variables; Spanish schooling system;

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    References

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    1. Denny, K.J. & Harmon, C.P., 2000. "Education Policy Reform and the Return to Schooling from Instrumental Variables," Papers 00/12, College Dublin, Department of Political Economy-.
    2. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    3. Callan, T. & Harmon, C.P., 1997. "The Economic Return to Schooling in Ireland," Papers 97/23, College Dublin, Department of Political Economy-.
    4. Meghir, Costas & Palme, Mårten, 1999. "Assessing the Effect of Schooling on Earnings Using a Social Experiment," Working Paper Series in Economics and Finance 313, Stockholm School of Economics.
    5. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
    7. Jaume Garcia & Pedro J. Hernández & Ángel López Nicolás, 1998. "How wide is the gap? An investigation of gender wage differences using quantile regression," Economics Working Papers 287, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Vieira, Jose A. C., 1999. "Returns to education in Portugal," Labour Economics, Elsevier, vol. 6(4), pages 535-541, November.
    9. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
    10. David Card, 1994. "Earnings, Schooling, and Ability Revisited," NBER Working Papers 4832, National Bureau of Economic Research, Inc.
    11. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," NBER Working Papers 4483, National Bureau of Economic Research, Inc.
    12. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    13. Cecilia Albert Verdú, 1998. "- Higher Education Demand In Spain: The Influence Of Labour Market Signals And Family Background," Working Papers. Serie EC 1998-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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    Cited by:
    1. Zamarro, Gema, 2010. "Accounting for heterogeneous returns in sequential schooling decisions," Journal of Econometrics, Elsevier, vol. 156(2), pages 260-276, June.
    2. Ismail, Ramlee, 2007. "The Impact of Schooling Reform on Returns to Education in Malaysia," MPRA Paper 15021, University Library of Munich, Germany, revised 29 Jan 2008.

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