Interpreting Instrumental Variables Estimates of the Returns to Schooling
This article synthesizes economic insights from theoretical models of schooling choice based on individual benefits and econometric work interpreting instrumental variables estimates as weighted averages of individual-specific causal effects. Linkages are illustrated using college proximity to instrument for schooling. After characterizing groups differentially affected by the instrument according to family background, 1 directly compute weights underlying estimation of the overall return. In analyzing the level of schooling at which individuals change their behavior in response to the instrument, I demonstrate that this instrument has its greatest impact on the transition from high school to college. Specification robustness is also examined.
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Volume (Year): 19 (2001)
Issue (Month): 3 (July)
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References listed on IDEAS
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- James Heckman & Edward Vytlacil, 1998. "Instrumental Variables Methods for the Correlated Random Coefficient Model: Estimating the Average Rate of Return to Schooling When the Return is Correlated with Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 974-987.
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- Meyer, Bruce D, 1995.
"Natural and Quasi-experiments in Economics,"
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- Joshua D. Angrist, 1995.
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NBER Working Papers
5192, National Bureau of Economic Research, Inc.
- Joshua D. Angrist, 1998. "Estimating the Labor Market Impact of Voluntary Military Service Using Social Security Data on Military Applicants," Econometrica, Econometric Society, vol. 66(2), pages 249-288, March.
- Stephen Cameron & Christopher Taber, 2000. "Borrowing Constraints and the Returns to Schooling," NBER Working Papers 7761, National Bureau of Economic Research, Inc.
- Joshua D. Angrist & Guido W. Imbens, 1995.
"Identification and Estimation of Local Average Treatment Effects,"
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0118, National Bureau of Economic Research, Inc.
- Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
- David Card, 1994. "Earnings, Schooling, and Ability Revisited," NBER Working Papers 4832, National Bureau of Economic Research, Inc.
- Caroline M. Hoxby, 1997. "How the Changing Market Structure of U.S. Higher Education Explains College Tuition," NBER Working Papers 6323, National Bureau of Economic Research, Inc.
- Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
- Wooldridge, Jeffrey M., 1997. "On two stage least squares estimation of the average treatment effect in a random coefficient model," Economics Letters, Elsevier, vol. 56(2), pages 129-133, October.
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