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Dispersion in the economic return to schooling

  • Harmon, Colm
  • Hogan, Vincent
  • Walker, Ian

In this Paper we extend the standard human capital earnings function to include dispersion in the rate of return to schooling by treating the return as a random coefficient. One motivation is that if dipping further into the ability distribution has brought about the increase in supply of skilled workers. Alternatively if the expansion in post-compulsory education comes about through relaxed credit constraints then we might expect this to increase average ability in the pool of educated workers. Either event might lead to a rise in the variance in returns. Based on a sample of data from the United Kingdom our estimates suggest that neither the mean nor the dispersion in returns to schooling has altered significantly over time. This is consistent with educational expansion not leading to a disproportionate inflow of low ability individuals into the system.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 10 (2003)
Issue (Month): 2 (April)
Pages: 205-214

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Handle: RePEc:eee:labeco:v:10:y:2003:i:2:p:205-214
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Charles F. Manski & John V. Pepper, 1998. "Monotone Instrumental Variables with an Application to the Returns to Schooling," NBER Technical Working Papers 0224, National Bureau of Economic Research, Inc.
  2. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  3. Vincent Hogan & Roberto Rigobon, 2002. "Using Heteroscedasticity to Estimate the Returns to Education," NBER Working Papers 9145, National Bureau of Economic Research, Inc.
  4. Harmon, Colm & Walker, Ian, 1999. "The marginal and average returns to schooling in the UK," European Economic Review, Elsevier, vol. 43(4-6), pages 879-887, April.
  5. Pereira, Pedro T. & Martins, Pedro S., 2001. "Is there a Return-Risk Link in Education?," IZA Discussion Papers 321, Institute for the Study of Labor (IZA).
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  7. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc.
  8. Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
  9. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  10. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, December.
  11. Dearden, Lorraine, et al, 2002. "The Returns to Academic and Vocational Qualifications in Britain," Bulletin of Economic Research, Wiley Blackwell, vol. 54(3), pages 249-74, July.
  12. Denny, Kevin & Harmon, Colm & Lydon, Raemonn, 2002. "Cross Country Evidence on the Returns to Education: Patterns and Explanations," CEPR Discussion Papers 3199, C.E.P.R. Discussion Papers.
  13. D.H. Blackaby & D.G. Leslie & P.D. Murphy, 2002. "White-ethnic minority earnings and employment differentials in Britain: evidence from the LFS," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 270-297, April.
  14. Stacey H. Chen, 2002. "Is Investing College Education Risky?," Labor and Demography 0202001, EconWPA.
  15. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  16. Colm Harmon & Ian Walker, 1997. "The Marginal and Average Returns to Schooling," Keele Department of Economics Discussion Papers (1995-2001) 97/07, Department of Economics, Keele University.
  17. Park, Jin Heum, 1996. "Measuring education over time: A comparison of old and new measures of eduction from the Current Population Survey," Economics Letters, Elsevier, vol. 50(3), pages 425-428, March.
  18. Uusitalo, R. & Conneely, K., 1998. "Estimating Heterogeneous Treatment Effects in the Becker Schooling Model," University of Helsinki, Department of Economics 435, Department of Economics.
  19. Trostel, Philip & Walker, Ian & Woolley, Paul, 2002. "Estimates of the economic return to schooling for 28 countries," Labour Economics, Elsevier, vol. 9(1), pages 1-16, February.
  20. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  21. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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