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Using Unemployment Rates as Instruments to Estimate Returns to Schooling

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  • Jeremy Arkes

Abstract

I use state unemployment rates during a person's teenage years to estimate the returns to schooling. A higher unemployment rate reduces the opportunity costs of attending school. Using the same 1980 Census data set that Angrist and Krueger (1991) use, I also estimate returns to schooling with a modified version of their quarter‐of‐birth instrument. The estimates from the two‐stage least squares (2SLS) model using the unemployment rate and the model using the quarter‐of‐birth instruments are almost identical. In addition, these 2SLS estimates are larger than the ordinary least squares (OLS) estimates, supporting this counterintuitive, yet prevalent, result in the literature.

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  • Jeremy Arkes, 2010. "Using Unemployment Rates as Instruments to Estimate Returns to Schooling," Southern Economic Journal, John Wiley & Sons, vol. 76(3), pages 711-722, January.
    • Handle: RePEc:wly:soecon:v:76:y:2010:i:3:p:711-722
    DOI: 10.4284/sej.2010.76.3.711
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    Cited by:

    1. By Marianne Haraldsvik & Bjarne Strøm, 2022. "Adult skills and labor market conditions during teenage years: cross-country evidence from international surveys [Is post-secondary education a safe port and for whom? Evidence from Canadian data]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 894-919.
    2. Ayan, Davut, 2016. "Unemployment Among the Recent U.S. Veterans," MPRA Paper 117307, University Library of Munich, Germany.

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