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Quality of schooling, returns to schooling and the 1981 vouchers reform in Chile

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Author Info
Patrinos, Harry Anthony

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Abstract

This paper exploits unique information on cognitive ability to examine the importance of schooling and non-schooling cognitive skills for heterogeneous individuals using instrumental variables estimation. Using a binary instrument based on the 1981 reform in Chile, the authors find that the main beneficiaries of the reform were those who at the time were pupils in basic schooling (ages 6-13). For this treated group of pupils, only a negligible part of the estimated return to schooling is due to classical ability bias. The labor market reward to an additional year of schooling is a measure of the"true"non-cognitive return to schooling. However, once the treated group is expanded to include secondary school students, the pure return to schooling decreases dramatically, while the return to schooling cognitive and non-schooling cognitive skills increases accordingly, suggesting that a large part of the estimated return in an earnings function is due to classical ability bias. For this treated group (mixture of basic school and secondary school age students), the labor market rewarded cognitive skills (especially those acquired through schooling) significantly.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4617.

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Date of creation: 01 May 2008
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Handle: RePEc:wbk:wbrwps:4617

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Related research
Keywords: Education For All; Primary Education; Secondary Education; Teaching and Learning; Access&Equity in Basic Education; Economics of Education;

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References listed on IDEAS
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  1. Costas Meghir & Mårten Palme, 1999. "Assessing the effect of schooling on earnings using a social experiment," IFS Working Papers W99/10, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  2. Sebastián Bustos & Dante Contreras & Paulina Sepulveda, 2007. "When schools are the ones that choose: the effect of screening in Chile," Working Papers wp242, University of Chile, Department of Economics. [Downloadable!]
  3. Angrist, Joshua D & Krueger, Alan B, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 979-1014, November. [Downloadable!] (restricted)
    Other versions:
  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  5. Claudio Sapelli & Bernardita Vial, 2002. "The Performance of Private and Public Schools in the Chilean Voucher System," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 39(118), pages 423-454. [Downloadable!]
  6. Hsieh, Chang-Tai & Urquiola, Miguel, 2006. "The effects of generalized school choice on achievement and stratification: Evidence from Chile's voucher program," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1477-1503, September. [Downloadable!] (restricted)
  7. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, And Ability: Evidence From A New Sample Of Identical Twins," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 253-284, February. [Downloadable!] (restricted)
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  8. Claudio Sapelli, 2003. "The Chilean Voucher System: Some New Results and Research Challenges," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 530-538. [Downloadable!]
  9. Harry Patrinos & Chris Sakellariou, 2005. "Schooling and Labor Market Impacts of a Natural Policy Experiment," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 19(4), pages 705-719, December. [Downloadable!] (restricted)
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  10. Hause, John C, 1971. "Ability and Schooling as Determinants of Lifetime Earnings or If You're So Smart, Why Aren't You Rich?," American Economic Review, American Economic Association, vol. 61(2), pages 289-98, May. [Downloadable!] (restricted)
  11. Esther Duflo, 2001. "Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment," American Economic Review, American Economic Association, vol. 91(4), pages 795-813, September. [Downloadable!] (restricted)
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  12. Edwin Leuven & Hessel Oosterbeek & Hans van Ophem, 2004. "Explaining international differences in male skill wage differentials by differences in demand and supply of skill," Economic Journal, Royal Economic Society, vol. 114(495), pages 466-486, 04. [Downloadable!] (restricted)
  13. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
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  14. Chris Sakellariou, 2006. "Education policy reform, local average treatment effect and returns to schooling from instrumental variables in the Philippines," Applied Economics, Taylor and Francis Journals, vol. 38(4), pages 473-481, March. [Downloadable!] (restricted)
  15. Ishikawa, Mamoru & Ryan, Daniel, 2002. "Schooling, basic skills and economic outcomes," Economics of Education Review, Elsevier, vol. 21(3), pages 231-243, June. [Downloadable!] (restricted)
  16. Behrman, Jere R. & Ross, David & Sabot, Richard, 2008. "Improving quality versus increasing the quantity of schooling: Estimates of rates of return from rural Pakistan," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 94-104, February. [Downloadable!] (restricted)
  17. Francisco A. Gallego, 2004. "School Choice, Incentives, and Academic Outcomes: Evidence from Chile," Econometric Society 2004 Latin American Meetings 39, Econometric Society. [Downloadable!]
  18. Francine D. Blau & Lawrence M. Kahn, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Hause, John C, 1972. "Earnings Profile: Ability and Schooling," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S108-S38, Part II, . [Downloadable!] (restricted)
  20. Oscar Landerretche, 2007. "When schools are the ones that choose: the effect of screening in Chile," Working Papers wp240, University of Chile, Department of Economics. [Downloadable!]
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