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Instrument Choice and the Returns to Education: New Evidence from Vietnam

  • Jean-Louis ARCAND

    ()

    (Institut des Hautes Etudes Internationales et du Développement)

  • Béatrice D'HOMBRES

    ()

    (Centre d'Etudes et de Recherches sur le Développement International)

  • Paul GYSELINCK

    ()

This paper focuses on instrument choice while consistently estimating the returns to education in Vietnam. Using data culled from the 2 rounds of the Vietnam Living Standards Survey (VLSS), we explore different sets of exogenous instruments that rely on demand and supply side sources of variation in schooling as well as the matrix of instruments proposed by Hausman and Taylor (1981). Instrument validity tests suggest that many variables do not satisfy the necessary conditions allowing them to be used as instruments. As in several studies, we find that IV estimates of the returns to education are substantially higher than the corresponding OLS estimate. We show how the Hausman-Taylor matrix of instruments, when combined with other instruments, may be a useful way of consistently estimating an average return to education rather than a local average treatment effect (Angrist, 1994).

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Paper provided by CERDI in its series Working Papers with number 200422.

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Length: 21
Date of creation: 2004
Date of revision:
Handle: RePEc:cdi:wpaper:633
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