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Heterogeneous Economic Returns to Post-Secondary Degrees: Evidence from Chile

Author

Listed:
  • Jorge Rodríguez
  • Sergio Urzúa
  • Loreto Reyes

Abstract

We analyze the economic returns to post-secondary degrees in Chile. We posit a schooling decision model with unobserved ability, degree-specific tuition costs, and earnings. We use administrative records to carry out our empirical analysis. Our results show positive average returns to post-secondary education, especially for five-year degrees. However, we also uncover significant heterogeneity. We document how unobserved characteristics (ability) determine the economic benefits of first- and second-best choices, even leading to negative returns to post-secondary degrees. Our findings illustrate the importance of allowing for heterogeneous treatment effects and individuals’ choices when examining the returns to education.

Suggested Citation

  • Jorge Rodríguez & Sergio Urzúa & Loreto Reyes, 2016. "Heterogeneous Economic Returns to Post-Secondary Degrees: Evidence from Chile," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 416-460.
  • Handle: RePEc:uwp:jhriss:v:51:y:2016:i:2:p:416-460
    Note: DOI: 10.3368/jhr.51.2.0213-5474R1
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    References listed on IDEAS

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    1. James J. Heckman & Sergio Urzua & Edward Vytlacil, 2006. "Understanding Instrumental Variables in Models with Essential Heterogeneity," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 389-432, August.
    2. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 7-36, October.
    3. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
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    7. Sergio Urzúa, 2008. "Racial Labor Market Gaps: The Role of Abilities and Schooling Choices," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
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    12. Claudio Sapelli, 2003. "Ecuaciones de Mincer y las Tasas de Retorno a la Educación en Chile: 1990-1998," Documentos de Trabajo 254, Instituto de Economia. Pontificia Universidad Católica de Chile..
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    14. Marina Bassi & Matías Busso & Sergio Urzúa & Jaime Vargas, 2012. "Disconnected: Skills, Education, and Employment in Latin America," IDB Publications (Books), Inter-American Development Bank, number 79504, February.
    15. Aakvik, Arild & Heckman, James J. & Vytlacil, Edward J., 2005. "Estimating treatment effects for discrete outcomes when responses to treatment vary: an application to Norwegian vocational rehabilitation programs," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 15-51.
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    Citations

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    Cited by:

    1. Rojas, Eugenio & Sánchez, Rafael & Villena, Mauricio G., 2016. "Credit constraints in higher education in a context of unobserved heterogeneity," Economics of Education Review, Elsevier, vol. 52(C), pages 225-250.
    2. Nora Lustig & Luis F. Lopez-Calva & Eduardo Ortiz-Juarez, 2013. "Deconstructing the Decline in Inequality in Latin America," Working Papers 1314, Tulane University, Department of Economics.
    3. Dante Contreras & Jorge Rodríguez & Sergio Urzúa, 2019. "The Return to Private Education: Evidence from School-to-Work Transitions," Working Papers wp479, University of Chile, Department of Economics.
    4. Busso, Matias & Dinkelman, Taryn & Claudia Martínez, A. & Romero, Dario, 2017. "The effects of financial aid and returns information in selective and less selective schools: Experimental evidence from Chile," Labour Economics, Elsevier, vol. 45(C), pages 79-91.
    5. repec:aea:aejapp:v:9:y:2017:i:3:p:223-61 is not listed on IDEAS
    6. repec:aea:aecrev:v:109:y:2019:i:1:p:1-47 is not listed on IDEAS
    7. Seth D. Zimmerman, 2019. "Elite Colleges and Upward Mobility to Top Jobs and Top Incomes," American Economic Review, American Economic Association, vol. 109(1), pages 1-47, January.
    8. Carolina González-Velosa & Graciana Rucci & Miguel Sarzosa & Sergio Urzúa, 2015. "Returns to Higher Education in Chile and Colombia," IDB Publications (Working Papers) 88676, Inter-American Development Bank.
    9. repec:eee:ecoedu:v:65:y:2018:i:c:p:58-92 is not listed on IDEAS
    10. Biewen, Martin & Tapalaga, Madalina, 2017. "Early Tracking, Academic vs. Vocational Training and the Value of 'Second Chance' Options," IZA Discussion Papers 11080, Institute of Labor Economics (IZA).
    11. Lars Kirkebøen & Edwin Leuven & Magne Mogstad, 2014. "Field of Study, Earnings, and Self-Selection," NBER Working Papers 20816, National Bureau of Economic Research, Inc.
    12. W. Bentley MacLeod & Evan Riehl & Juan E. Saavedra & Miguel Urquiola, 2017. "The Big Sort: College Reputation and Labor Market Outcomes," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 223-261, July.
    13. Katja Maria Kaufmann & Matthias Messner & Alex Solis, 2013. "Returns to Elite Higher Education in the Marriage Market: Evidence from Chile," Working Papers 489, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    14. Justine Hastings & Christopher A. Neilson & Seth D. Zimmerman, 2015. "The Effects of Earnings Disclosure on College Enrollment Decisions," NBER Working Papers 21300, National Bureau of Economic Research, Inc.
    15. Hastings, Justine S. & Neilson, Christopher A. & Ramirez, Anely & Zimmerman, Seth D., 2016. "(Un)informed college and major choice: Evidence from linked survey and administrative data," Economics of Education Review, Elsevier, vol. 51(C), pages 136-151.
    16. Nicolas Grau, 2013. "The Impact of College Admissions Policies on The Performance of High School Students," PIER Working Paper Archive 13-040, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    17. Busso, Matias & Dinkelman, Taryn & Claudia Martínez, A. & Romero, Dario, 2017. "The effects of financial aid and returns information in selective and less selective schools: Experimental evidence from Chile," Labour Economics, Elsevier, vol. 45(C), pages 79-91.
    18. Adriana Camacho & Julián Messina & Juan Pablo Uribe, 2017. "The Expansion of Higher Education in Colombia: Bad Students or Bad Programs?," Documentos CEDE 015352, Universidad de los Andes - CEDE.
    19. Radchenko, Natalia, 2014. "Heterogeneity in Informal Salaried Employment: Evidence from the Egyptian Labor Market Survey," World Development, Elsevier, vol. 62(C), pages 169-188.

    More about this item

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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