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Education Policy Reform and the Return to Schooling from Instrumental Variables

Author

Listed:
  • Kevin J Denny

    (University College Dublin)

  • Colm P Harmon

    (University College Dublin)

Abstract

This paper exploits an unusual policy reform that had the effect of reducing the direct cost of schooling in Ireland in the late 1960’s. This gave rise to an increased level of schooling but with effects that vary substantially across family background. This interaction of educational reform and family background generates a set of instrumental variables that are used to estimate the return to schooling allowing for the endogeneity of schooling. Using a standard Mincer type model we find a large and well-determined rate of return of around 12% which are substantially higher than the OLS estimates of around 7%.

Suggested Citation

  • Kevin J Denny & Colm P Harmon, 2000. "Education Policy Reform and the Return to Schooling from Instrumental Variables," Working Papers 200012, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200012
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    References listed on IDEAS

    as
    1. Imbens, G. & Angrist, J.D., 1992. "Average Causal Response with Variable Treatment Intensity," Harvard Institute of Economic Research Working Papers 1611, Harvard - Institute of Economic Research.
    2. Kling, Jeffrey R, 2001. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(3), pages 358-364, July.
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    6. Tussing, A. Dale, 1978. "Irish Educational Expenditures - Past, Present, and Future," Research Series, Economic and Social Research Institute (ESRI), number GRS92, June.
    7. Callan, Tim & Harmon, Colm, 1999. "The economic return to schooling in Ireland," Labour Economics, Elsevier, vol. 6(4), pages 543-550, November.
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    13. Ashenfelter, Orley & Harmon, Colm & Oosterbeek, Hessel, 1999. "A review of estimates of the schooling/earnings relationship, with tests for publication bias," Labour Economics, Elsevier, vol. 6(4), pages 453-470, November.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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