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Understanding the role of time-varying unobserved ability heterogeneity in education production

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  • Ding, Weili
  • Lehrer, Steven F.

Abstract

Unobserved ability heterogeneity has long been postulated to play a key role in human capital development. Traditional strategies to estimate education production functions do not allow for varying role or development of unobserved ability as a child ages. Such restrictions are highly inconsistent with a growing body of scientific evidence; moreover, in order to obtain unbiased parameter estimates of observed educational inputs, researchers must properly account for unobserved skills that may be correlated with other inputs to the production process. To illustrate our empirical strategy we use experimental data from Tennessee's Student/Teacher Achievement Ratio experiment, known as Project STAR. We find that unobserved ability is endogenously developed over time and its impact on cognitive achievement varies significantly between grades in all subject areas. Moreover, we present evidence that accounting for time-varying unobserved ability across individuals and a more general depreciating pattern of observed inputs are both important when estimating education production functions.

Suggested Citation

  • Ding, Weili & Lehrer, Steven F., 2014. "Understanding the role of time-varying unobserved ability heterogeneity in education production," Economics of Education Review, Elsevier, vol. 40(C), pages 55-75.
    • Handle: RePEc:eee:ecoedu:v:40:y:2014:i:c:p:55-75
    DOI: 10.1016/j.econedurev.2014.01.004
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    Cited by:

    1. Michael J. Kottelenberg & Steven F. Lehrer, 2019. "How Skills and Parental Valuation of Education Influence Human Capital Acquisition and Early Labor Market Return to Human Capital in Canada," Journal of Labor Economics, University of Chicago Press, vol. 37(S2), pages 735-778.
    2. Maggie Jones & Michael Barber, 2019. "Inequalities in Test Scores between Indigenous and Non-Indigenous Youth in Canada," Department Discussion Papers 1904, Department of Economics, University of Victoria.
    3. Shenggang Yang & Heng Ye & Qi Zhu, 2017. "Do Peer Firms Affect Firm Corporate Social Responsibility?," Sustainability, MDPI, Open Access Journal, vol. 9(11), pages 1-7, October.
    4. Jeffrey Penney, 2017. "Racial Interaction Effects and Student Achievement," Education Finance and Policy, MIT Press, vol. 12(4), pages 447-467, Fall.

    More about this item

    Keywords

    Education production function; Unobserved ability; Student learning heterogeneity; Triangular systems;

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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