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Measuring heterogeneity in the returns to education using an education reform

  • Aakvik, Arild
  • Salvanes, Kjell G.
  • Vaage, Kjell

In this paper, we explore the impact of a mandatory education reform as well as pre-reform availability of schools above the mandatory level, on educational attainment and returns to education in Norway. We contribute to the existing literature by focusing on the heterogeneity of the impact of reforms. Our results indicate that increased compulsory education from seven to nine years increased the general level of education beyond the compulsory education. We also find that the effect of family background on educational attainment was weaker after the reform. The average treatment effect on returns to education is surprisingly high for education of intermediate duration. This means that increasing the general level of education potentially generates high returns in the form of wages. We also find that the effect of treatment on the treated on the returns to education is 1-4 percentage points higher than the average treatment effect.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 4 (May)
Pages: 483-500

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:4:p:483-500
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  1. Aakvik, Arild & Heckman, James J. & Vytlacil, Edward J., 2005. "Estimating treatment effects for discrete outcomes when responses to treatment vary: an application to Norwegian vocational rehabilitation programs," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 15-51.
  2. Haegeland, T. & Klette, T.J. & Salvanes, K.G., 1999. "Declining Returns to Education in NOrway? Comparing Estimates Across Cohorts, Sectors and Over Time," Papers 14/99, Norwegian School of Economics and Business Administration-.
  3. Gronau, Reuben, 1974. "Wage Comparisons-A Selectivity Bias," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1119-43, Nov.-Dec..
  4. Carneiro, Pedro & Hansen, Karsten T. & Heckman, James J., 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," IZA Discussion Papers 767, Institute for the Study of Labor (IZA).
  5. Philip Oreopoulos, 2006. "The compelling effects of compulsory schooling: evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 22-52, February.
  6. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July.
  7. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2005. "Evaluating the effect of education on earnings: models, methods and results from the National Child Development Survey," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 473-512.
  8. Lleras-Muney, Adriana, 2002. "Were Compulsory Attendance and Child Labor Laws Effective? An Analysis from 1915 to 1939," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 401-35, October.
  9. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  10. Costas Meghir & Mårten Palme, 2004. "Educational reform, ability and family background," IFS Working Papers W04/10, Institute for Fiscal Studies.
  11. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  12. 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.
  13. Wooldridge, Jeffrey M., 2003. "Further results on instrumental variables estimation of average treatment effects in the correlated random coefficient model," Economics Letters, Elsevier, vol. 79(2), pages 185-191, May.
  14. Daron Acemoglu & Joshua Angrist, 2001. "How Large are Human-Capital Externalities? Evidence from Compulsory-Schooling Laws," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 9-74 National Bureau of Economic Research, Inc.
  15. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
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