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Estimating the Returns to College Quality with Multiple Proxies for Quality

  • Dan A. Black

    (Syracuse University and NORC)

  • Jeffrey A. Smith

    (University of Michigan)

Existing studies of the effects of college quality on wages typically rely on a single proxy variable for college quality. This study questions the wisdom of using a single proxy given that it likely contains substantial measurement error. We consider four econometric approaches to the problem that involve the use of multiple proxies for college quality: factor analysis, instruments variables, a method recently proposed by Lubotsky and Wittenberg, and a GMM estimator. Our estimates suggest that the existing literature understates the wage effects of college quality and illustrate the value of using multiple proxies in this and other similar contexts.

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File URL: http://dx.doi.org/10.1086/505067
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 24 (2006)
Issue (Month): 3 (July)
Pages: 701-728

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Handle: RePEc:ucp:jlabec:v:24:y:2006:i:3:p:701-728
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