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Educational expansion and its heterogeneous returns for wage workers

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Author Info
Gebel, Michael
Pfeiffer, Friedhelm
Abstract

The paper examines the evolution of returns to education in the West German labour market over the last two decades. During this period, graduates from the period of educational expansion in the sixties and seventies entered the labour market and an upgrading of the skill structure took place. In order to tackle the issues of endogeneity of schooling and its heterogeneous returns we apply two estimation methods: Wooldridge?s (2004) approach that relies on conditional mean independence and Garen?s (1984) control function approach that requires an exclusion restriction. For the population of workers from the GSOEP, we find that both approaches produce estimates of average returns to education that decrease until the late 1990s and increase significantly afterwards. In the observation period, the gender gap in returns to education seems to vanish. Furthermore, we find that the so called ?baby boomer? cohort has the lowest average return to education in young ages. However, this effect disappears when they become older. --

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 07-010.

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Date of creation: 2007
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Handle: RePEc:zbw:zewdip:5497

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Related research
Keywords: Educational expansion; correlated random coefficient model; heterogeneous returns to education; conditional mean independence;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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References listed on IDEAS
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pfeiffer, Friedhelm & Reuß, Karsten, 2007. "Age-dependent Skill Formation and Returns to Education," ZEW Discussion Papers 07-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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