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Why do diplomas pay? An expanded Mincerian framework applied to Mexico

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  • Aashish Mehta
  • Hector Villarreal

Abstract

We compare four explanations for the value of diplomas, each of which has implications for unemployment and wage variation amongst graduates, most of which have not previously been tested for when seeking to explain the effects of diplomas. We test for these implications using a refined econometric framework, exploiting idiosyncrasies in Mexican labour market and educational institutions. Premiums in Mexico appear to result from diplomas tied to jobs with downwards rigid wages - an uncommon but simple explanation. The standard explanations, including screening, are not suggested by Mexican data. Our results illuminate how labour markets segmented by diplomas clear. This depends upon the nature of the labour market rigidities exactly as predicted by neoclassical theory.

Suggested Citation

  • Aashish Mehta & Hector Villarreal, 2008. "Why do diplomas pay? An expanded Mincerian framework applied to Mexico," Applied Economics, Taylor & Francis Journals, vol. 40(24), pages 3127-3144.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:24:p:3127-3144
    DOI: 10.1080/00036840600994120
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    Cited by:

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    2. Cabral, René & Mollick, André Varella, 2017. "Mexican real wages and the U.S. economy," Economic Modelling, Elsevier, vol. 64(C), pages 141-152.
    3. Mehta, Aashish & Mohr, Belinda Acuña, 2012. "Economic Liberalization and Rising College Premiums in Mexico: A Reinterpretation," World Development, Elsevier, vol. 40(9), pages 1908-1920.
    4. Nicolas Hérault & Rezida Zakirova, 2011. "Sheepskin Effects in the Returns to Education: Accounting for Enrolment and Completion Effects," Melbourne Institute Working Paper Series wp2011n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    5. Barham, Bradford L. & Callenes, Mercedez & Gitter, Seth & Lewis, Jessa & Weber, Jeremy, 2011. "Fair Trade/Organic Coffee, Rural Livelihoods, and the "Agrarian Question": Southern Mexican Coffee Families in Transition," World Development, Elsevier, vol. 39(1), pages 134-145, January.
    6. Nicolas H�rault & Rezida Zakirova, 2015. "Returns to education: accounting for enrolment and completion effects," Education Economics, Taylor & Francis Journals, vol. 23(1), pages 84-100, February.

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