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Educational Expansion and Its Heterogeneous Returns for Wage Workers

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  • Michael Gebel
  • Friedhelm Pfeiffer

Abstract

This 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 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 wage workers from the SOEP, we find that both approaches produce estimates of average returns to education that decrease until the late 1990s and increase afterwards. 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 early working life. However, this effect disappears when the “baby-boomer” cohort grows older.

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  • Michael Gebel & Friedhelm Pfeiffer, 2010. "Educational Expansion and Its Heterogeneous Returns for Wage Workers," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 19-42.
  • Handle: RePEc:aeq:aeqsjb:v130_y2010_i1_q1_p19-42
    DOI: 10.3790/schm.130.1.19
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    4. Pfeiffer, Friedhelm & Reuß, Karsten, 2008. "Age-dependent skill formation and returns to education," Labour Economics, Elsevier, vol. 15(4), pages 631-646, August.
    5. Schäfer Andrea & Gottschall Karin, 2016. "Zahlt sich Akademisierung aus?: Geschlechtsspezifische Lohnniveaus und Erträge von höherer Bildung in Pflege- und ärztlichen Berufen," Arbeit, De Gruyter, vol. 25(3-4), pages 125-145, December.
    6. Drewek, Peter, 2020. "Bildungsdefizite coronabedingter Schulschließungen? Eine bildungshistorische Analyse," ZEW Discussion Papers 20-073, ZEW - Leibniz Centre for European Economic Research.
    7. Friedhelm PFEIFFER & Winfried POHLMEIER, 2011. "Causal Returns to Schooling and Individual Heterogeneity," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 29-41, December.
    8. Riphahn & Caroline Schwientek, 2015. "What drives the reversal of the gender education gap? Evidence from Germany," Applied Economics, Taylor & Francis Journals, vol. 47(53), pages 5748-5775, November.
    9. David Brady & Thomas Biegert, 2017. "The Rise of Precarious Employment in Germany," SOEPpapers on Multidisciplinary Panel Data Research 936, DIW Berlin, The German Socio-Economic Panel (SOEP).
    10. Heigle, Julia & Pfeiffer, Friedhelm, 2020. "Langfristige Wirkungen eines nicht abgeschlossenen Studiums auf individuelle Arbeitsmarktergebnisse und die allgemeine Lebenszufriedenheit," ZEW Discussion Papers 20-004, ZEW - Leibniz Centre for European Economic Research.
    11. Stephan O. Hornig & Horst Rottmann & Rüdiger Wapler, 2009. "Information Asymmetry, Education Signals and the Case of Ethnic and Native Germans," CESifo Working Paper Series 2683, CESifo.
    12. Felix Busch, 2020. "Gender Segregation, Occupational Sorting, and Growth of Wage Disparities Between Women," Demography, Springer;Population Association of America (PAA), vol. 57(3), pages 1063-1088, June.
    13. Brunello, Giorgio & Crivellaro, Elena & Rocco, Lorenzo, 2010. "Lost in Transition? The Returns to Education Acquired under Communism 15 Years after the Fall of the Berlin Wall," IZA Discussion Papers 5409, Institute of Labor Economics (IZA).
    14. Pfeiffer, Friedhelm & Stichnoth, Holger, 2018. "Fiskalische und individuelle Nettoerträge und Renditen von Bildungsinvestitionen im jungen Erwachsenenalter," ZEW Discussion Papers 18-043, ZEW - Leibniz Centre for European Economic Research.
    15. Biewen, Martin & (neé Tapalaga), Madalina Thiele, 2020. "Early tracking, academic vs. vocational training, and the value of ‘second-chance’ options," Labour Economics, Elsevier, vol. 66(C).
    16. Markus Klein, 2016. "The association between graduates’ field of study and occupational attainment in West Germany, 1980–2008 [Der Zusammenhang zwischen Studienfach und beruflichem Erfolg von Hochschulabsolventen in We," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(1), pages 43-58, July.
    17. Yang, Lijun, 2018. "Higher education expansion and post-college unemployment: Understanding the roles of fields of study in China," International Journal of Educational Development, Elsevier, vol. 62(C), pages 62-74.
    18. Blomeyer, Dorothea & Coneus, Katja & Laucht, Manfred & Pfeiffer, Friedhelm, 2008. "Self-Productivity and Complementarities in Human Development: Evidence from the Mannheim Study of Children at Risk," IZA Discussion Papers 3734, Institute of Labor Economics (IZA).
    19. Daniel Kemptner & Jan Marcus, 2011. "Spillover Effects of Maternal Education on Child's Health and Schooling," SOEPpapers on Multidisciplinary Panel Data Research 375, DIW Berlin, The German Socio-Economic Panel (SOEP).
    20. Regina T. Riphahn & Martina Eschelbach & Guido Heineck & Steffen Müller, 2010. "Kosten und Nutzen der Ausbildung an Tertiärbildungsinstitutionen im Vergleich," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(2), pages 103-131, May.
    21. Giulio Bosio & Chiara Noè, 2011. "Higher Education Expansion, Human Capital Externalities and Wages: Italian Evidence within Occupation," Working Papers 39, AlmaLaurea Inter-University Consortium.
    22. David Brady & Thomas Biegert, 2017. "The Rise of Precarious Employment in Germany," LIS Working papers 708, LIS Cross-National Data Center in Luxembourg.
    23. Felix Busch, 0. "Gender Segregation, Occupational Sorting, and Growth of Wage Disparities Between Women," Demography, Springer;Population Association of America (PAA), vol. 0, pages 1-26.
    24. Cornelissen Thomas & Jirjahn Uwe & Tsertsvadze Georgi, 2008. "Parental Background and Earnings: German Evidence on Direct and Indirect Relationships," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 554-572, October.

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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • 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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