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Interpreting Degree Effects in the Returns to Education

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  • Alfonso Flores-Lagunes
  • Audrey Light

Abstract

Researchers often identify degree effects by including degree attainment (D) and years of schooling (S) in a wage model, yet the source of independent variation in these measures is not well understood. We argue that S is negatively correlated with ability among degree-holders because the most able graduate the fastest, but positively correlated among dropouts because the most able benefit from increased schooling. Using NLSY79 data, we find support for this argument; our findings also suggest that highest grade completed is the preferred measure of S for dropouts, while age at school exit is a more informative measure for degree-holders.

Suggested Citation

  • Alfonso Flores-Lagunes & Audrey Light, 2010. "Interpreting Degree Effects in the Returns to Education," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
  • Handle: RePEc:uwp:jhriss:v:45:y:2010:i2:p439-467
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    Cited by:

    1. Stratton Leslie S. & Wetzel James N., 2013. "Are Students Dropping Out or Simply Dragging Out the College Experience? Persistence at the Six-Year Mark," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1121-1142.
    2. John Bound & Michael F. Lovenheim & Sarah Turner, 2012. "Increasing Time to Baccalaureate Degree in the United States," Education Finance and Policy, MIT Press, pages 375-424.
    3. John Bound & Michael F. Lovenheim & Sarah Turner, 2012. "Increasing Time to Baccalaureate Degree in the United States," Education Finance and Policy, MIT Press, pages 375-424.
    4. John Bound & Sarah Turner, 2007. "Understanding the Increased Time to the Baccalaureate Degree," Discussion Papers 06-043, Stanford Institute for Economic Policy Research.
    5. Carlos A. Flores & Alfonso Flores-Lagunes, 2013. "Partial Identification of Local Average Treatment Effects With an Invalid Instrument," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(4), pages 534-545, October.
    6. O’Mahony, Mary & Pastor, José Manuel & Peng, Fei & Serrano, Lorenzo & Hernández, Laura, 2012. "Output growth in the post‐compulsory education sector: the European experience," MPRA Paper 44016, University Library of Munich, Germany.
    7. Carruthers, Celeste K. & Özek, Umut, 2016. "Losing HOPE: Financial aid and the line between college and work," Economics of Education Review, Elsevier, vol. 53(C), pages 1-15.
    8. Audrey Light & Andrew McGee, 2015. "Employer Learning and the “Importance” of Skills," Journal of Human Resources, University of Wisconsin Press, vol. 50(1), pages 72-107.
    9. Jeffrey T. Denning & Benjamin M. Marx & Lesley J. Turner, 2017. "ProPelled: The Effects of Grants on Graduation, Earnings, and Welfare," Upjohn Working Papers and Journal Articles 17-280, W.E. Upjohn Institute for Employment Research.
    10. Liu, Vivian Y.T. & Belfield, Clive R. & Trimble, Madeline J., 2015. "The medium-term labor market returns to community college awards: Evidence from North Carolina," Economics of Education Review, Elsevier, vol. 44(C), pages 42-55.

    More about this item

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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