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On The Rewards To Education In Spain: Endogeneity And Regional Differences

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  • LILLO, Adelaida
  • CASADO-DÍAZ, José M.

Abstract

This paper presents empirical evidence on the returns to education in Spain using the Survey on the Quality of Life in the Workplace. Five waves of the survey have been pooled to build a dataset for which Mincer-type earning functions are estimated. Unlike other analyses experience is computed as actual and not potential experience, and a variable capturing periods of unemployment is also included to better approach the underlying concept, this being specially relevant given high unemployment rates in Spain and average length of these periods among certain groups. We calculate the returns to education for male workers following the simplest Mincer’s specification estimated by (a) OLS and (b) instrumental variables (IV) techniques as a means to deal with endogeneity concerns regarding schooling and find that returns to education for male salaried workers are 5.68 (OLS) and 7.37 (IV with a family background instrument) giving evidence of a slightly declining trend in the rate of return to education in Spain. The consideration of schooling attainment as qualifications allow relaxing Mincer’s underlying hypothesis of linearity of the returns to education in schooling. Evidence against this assumption is displayed. We also test the parallelism of log-earnings experience profiles across schooling levels. The empirical analysis is finally extended by focusing on regional differences.

Suggested Citation

  • LILLO, Adelaida & CASADO-DÍAZ, José M., 2010. "On The Rewards To Education In Spain: Endogeneity And Regional Differences," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 10(3).
  • Handle: RePEc:eaa:eerese:v:10:y2010:i:3_3
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    File URL: http://www.usc.es/economet/reviews/eers1033.pdf
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    References listed on IDEAS

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    1. M. Arrazola & J. De Hevia & M. Risueno & J. F. Sanz, 2003. "Returns to education in Spain: Some evidence on the endogeneity of schooling," Education Economics, Taylor & Francis Journals, vol. 11(3), pages 293-304.
    2. Hipolito Simon & Raul Ramos & Esteban Sanroma, 2006. "Collective bargaining and regional wage differences in Spain: an empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 38(15), pages 1749-1760.
    3. James J. Heckman & Xuesong Li, 2003. "Selection Bias, Comparative Advantage and Heterogeneous Returns to Education," NBER Working Papers 9877, National Bureau of Economic Research, Inc.
    4. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    5. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
    6. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, April.
    7. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    8. Maria Arrazola & Jose de Hevia, 2006. "Gender Differentials in Returns to Education in Spain," Education Economics, Taylor & Francis Journals, vol. 14(4), pages 469-486.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    returns to education; Mincer earning functions; Spain; human capital;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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