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Education Policy Reform and the Return to Schooling from Instrumental Variables

  • Denny, Kevin
  • Harmon, Colm

This paper exploits an unusual policy reform that had the effect of reducing the direct cost of schooling in Ireland in the late 1960’s. This gave rise to an increased level of schooling but with effects that vary substantially across family background. This interaction of educational reform and family background generates a set of instrumental variables that are used to estimate the return to schooling allowing for the endogeneity of schooling. Using a standard Mincer type model we find a large and well-determined rate of return of around 12% which is substantially higher than the OLS estimates of around 7%.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2518.

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Date of creation: Jul 2000
Date of revision:
Handle: RePEc:cpr:ceprdp:2518
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  1. Tussing, A. Dale, 1978. "Irish Educational Expenditures - Past, Present, and Future," Research Series, Economic and Social Research Institute (ESRI), number GRS92.
  2. Henry S. Farber & Jeffrey R. Kling & Alan Krueger, 1999. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," Working Papers 794, Princeton University, Department of Economics, Industrial Relations Section..
  3. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," NBER Working Papers 4483, National Bureau of Economic Research, Inc.
  4. Uusitalo, R. & Conneely, K., 1998. "Estimating Heterogeneous Treatment Effects in the Becker Schooling Model," University of Helsinki, Department of Economics 435, Department of Economics.
  5. Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
  6. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  7. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  8. Costas Meghir & Marten Palme, 2000. "Assessing the Effect of Schooling on Earnings Using a Social Experiment," Econometric Society World Congress 2000 Contributed Papers 0670, Econometric Society.
  9. Joshua D. Angrist & Guido W. Imbens, 1995. "Average Causal Response with Variable Treatment Intensity," NBER Technical Working Papers 0127, National Bureau of Economic Research, Inc.
  10. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, July.
  11. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  12. Kakwani, Nanak, 1980. "On a Class of Poverty Measures," Econometrica, Econometric Society, vol. 48(2), pages 437-46, March.
  13. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  14. Callan, Tim & Wren, Anne, 1994. "Male-Female Wage Differentials: Analysis and Policy Issues," Research Series, Economic and Social Research Institute (ESRI), number GRS163.
  15. Kevin Denny & Colm Harmon & Sandra Redmond, 2000. "Functional literacy, educational attainment and earnings : evidence from the international adult literacy survey," Open Access publications 10197/732, School of Economics, University College Dublin.
  16. Ashenfelter, Orley & Harmon, Colm & Oosterbeek, Hessel, 1999. "A review of estimates of the schooling/earnings relationship, with tests for publication bias," Labour Economics, Elsevier, vol. 6(4), pages 453-470, November.
  17. Kevin Denny & Colm Harmon & Dorren McMahon & Sandra Redmond, 1999. "Literacy and Education in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 30(3), pages 215-226.
  18. Callan, T. & Harmon, C.P., 1997. "The Economic Return to Schooling in Ireland," Papers 97/23, College Dublin, Department of Political Economy-.
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