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Testing for sheepskin effects in earnings equations: evidence for five countries


  • Kevin Denny
  • Colm Harmon


Using a dataset that allows consistent cross-country comparisons the non-linearity in a conventional earnings equation is tested with respect to schooling. The findings suggest that the assumption of linearity is not robust and that there are well-determined positive returns to the completion of educational levels. However, inferences are sensitive to the choice of functional form.

Suggested Citation

  • Kevin Denny & Colm Harmon, 2001. "Testing for sheepskin effects in earnings equations: evidence for five countries," Applied Economics Letters, Taylor & Francis Journals, vol. 8(9), pages 635-637.
  • Handle: RePEc:taf:apeclt:v:8:y:2001:i:9:p:635-637 DOI: 10.1080/13504850010028625

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    References listed on IDEAS

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    Cited by:

    1. Kevin Denny & Colm Harmon, 2000. "The impacts of education and training on the labour market experiences of young adults," Open Access publications 10197/731, School of Economics, University College Dublin.
    2. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30597, University Library of Munich, Germany.
    3. Natasha Bilkic & Thomas Gries & Margarethe Pilichowski, 2009. "Stay at school or start working? - Optimal timing of leaving school under uncertainty and irreversibility," Working Papers CIE 10, Paderborn University, CIE Center for International Economics.
    4. Hwang, Wei-Yei & Liao, Shu-Yi & Huang, Mao-Lung, 2013. "Real option, human capital investment returns and higher educational policy," Economic Modelling, Elsevier, vol. 31(C), pages 447-452.
    5. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," Working Papers 70, Barcelona Graduate School of Economics.
    6. Kevin Denny & Colm Harmon & Vincent O'Sullivan, 2003. "Functional literacy, educational attainment and earnings : a multi-country comparison," Working Papers 200319, School of Economics, University College Dublin.
    7. Kevin Denny & Orla Doyle, 2005. "Returns to basic skills in Central & Eastern Europe : a semi parametric approach," Working Papers 200507, School of Economics, University College Dublin.
    8. Arnaud Chevalier & Kevin Denny & Dorren McMahon, 2003. "A multi-country study of inter-generational educational mobility," Working Papers 200314, School of Economics, University College Dublin.
    9. Bilkic, N. & Gries, T. & Pilichowski, M., 2012. "Stay in school or start working? — The human capital investment decision under uncertainty and irreversibility," Labour Economics, Elsevier, vol. 19(5), pages 706-717.
    10. Denny, Kevin & Harmon, Colm & O'Connell, Philip J., 2000. "Investing in People: The Labour Market Impact of Human Resource Interventions Funded under the 1994-1999 Community Support Framework in Ireland," Research Series, Economic and Social Research Institute (ESRI), number PRS38.
    11. Whitaker, Stephan, 2011. "The impact of legalized abortion on high school graduation through selection and composition," Economics of Education Review, Elsevier, vol. 30(2), pages 228-246, April.
    12. Hogan, Vincent & Walker, Ian, 2007. "Education choice under uncertainty: Implications for public policy," Labour Economics, Elsevier, vol. 14(6), pages 894-912, December.
    13. Bitzan, John D., 2009. "Do sheepskin effects help explain racial earnings differences?," Economics of Education Review, Elsevier, vol. 28(6), pages 759-766, December.
    14. Skalli, Ali, 2007. "Are successive investments in education equally worthwhile? Endogenous schooling decisions and non-linearities in the earnings-schooling relationship," Economics of Education Review, Elsevier, vol. 26(2), pages 215-231, April.
    15. Habermalz, Steffen, 2003. "An Examination of Sheepskin Effects Over Time," IZA Discussion Papers 725, Institute for the Study of Labor (IZA).
    16. Darragh Flannery & Cathal O'Donoghue, 2016. "Utilizing Microsimulation to Estimate the Private and Fiscal Returns to Education: Ireland 1987–2011," Manchester School, University of Manchester, vol. 84(1), pages 55-80, January.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General


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