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Returns to Schooling and Bayesian Model Averaging: A Union of Two Literatures

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  • Justin L. Tobias
  • Mingliang Li

Abstract

In this paper, we review and unite the literatures on returns to schooling and Bayesian model averaging. We observe that most studies seeking to estimate the returns to education have done so using particular "and often different across researchers" model specifications. Given this, we review Bayesian methods which formally account for uncertainty in the specification of the model itself, and apply these techniques to estimate the economic return to a college education. The approach described in this paper enables us to determine those model specifications which are most favored by the given data, and also enables us to use the predictions obtained from all of the competing regression models to estimate the returns to schooling. The reported precision of such estimates also account for the uncertainty inherent in the model specification. Using U.S. data from the National Longitudinal Survey of Youth "NLSY", we also revisit several 'stylized facts' in the returns to education literature and examine if they continue to hold after formally accounting for model uncertainty. Copyright Blackwell Publishers Ltd, 2004.

Suggested Citation

  • Justin L. Tobias & Mingliang Li, 2004. "Returns to Schooling and Bayesian Model Averaging: A Union of Two Literatures," Journal of Economic Surveys, Wiley Blackwell, vol. 18(2), pages 153-180, April.
  • Handle: RePEc:bla:jecsur:v:18:y:2004:i:2:p:153-180
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    Cited by:

    1. Ley, Eduardo & Steel, Mark F.J., 2012. "Mixtures of g-priors for Bayesian model averaging with economic applications," Journal of Econometrics, Elsevier, vol. 171(2), pages 251-266.
    2. Koop, Gary & Leon-Gonzalez, Roberto & Strachan, Rodney, 2012. "Bayesian model averaging in the instrumental variable regression model," Journal of Econometrics, Elsevier, vol. 171(2), pages 237-250.
    3. León-González, Roberto & Montolio, Daniel, 2015. "Endogeneity and panel data in growth regressions: A Bayesian model averaging approach," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 23-39.
    4. Moral-Benito, Enrique, 2010. "Model averaging in economics," MPRA Paper 26047, University Library of Munich, Germany.
    5. Vanina Forget, 2012. "Doing well and doing good: a multi-dimensional puzzle," Working Papers hal-00672037, HAL.
    6. Steel, Mark F. J., 2017. "Model Averaging and its Use in Economics," MPRA Paper 81568, University Library of Munich, Germany.

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