IDEAS home Printed from https://ideas.repec.org/p/fpr/fcnddp/54.html
   My bibliography  Save this paper

Endogeneity of schooling in the wage function

Author

Listed:
  • Maluccio, John A.

Abstract

This paper evaluates the effect (in terms of private returns) of investment in education on wages in the rural Philippines. Statistical endogeneity of education in the wage function may result from (1) unobserved determinants of education that also influence wages and/or (2) measurement error. Panel data are used that provide relevant instruments, particularly distance to schools and measures of household resources, at the time of schooling, to endogenize investments in education while estimating wage functions. The estimated return to education increases more than 60 percent when education is endogenized. This increase is robust to the inclusion of a measure of health, models of selection into the sample, and measurement error. The paper suggests how heterogeneous returns to education might account for the magnitude of the downward bias in returns to schooling.

Suggested Citation

  • Maluccio, John A., 1998. "Endogeneity of schooling in the wage function," FCND discussion papers 54, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:fcnddp:54
    as

    Download full text from publisher

    File URL: http://www.ifpri.org/sites/default/files/publications/dp54.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Rosenzweig, Mark R., 1988. "Labor markets in low-income countries," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 15, pages 713-762 Elsevier.
    2. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
    3. Joshua D. Angrist & Alan B. Krueger, 1991. "Estimating the Payoff to Schooling Using the Vietnam-era Draft Lottery," Working Papers 670, Princeton University, Department of Economics, Industrial Relations Section..
    4. 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.
    5. Lam, David & Schoeni, Robert F, 1993. "Effects of Family Background on Earnings and Returns to Schooling: Evidence from Brazil," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 710-740, August.
    6. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
    7. Angrist, J.D. & Imbens, G.W., 1992. "Average causal response with variable treatment intensity," Discussion Paper 1992-34, Tilburg University, Center for Economic Research.
    8. Thomas, Duncan & Strauss, John, 1997. "Health and wages: Evidence on men and women in urban Brazil," Journal of Econometrics, Elsevier, vol. 77(1), pages 159-185, March.
    9. Kane, Thomas J & Rouse, Cecilia Elena, 1995. "Labor-Market Returns to Two- and Four-Year College," American Economic Review, American Economic Association, vol. 85(3), pages 600-614, June.
    10. Behrman, Jere R & Wolfe, Barbara L, 1984. "The Socioeconomic Impact of Schooling in a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 296-303, May.
    11. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
    12. Thomas, Duncan & Maluccio, John, 1996. "Fertility, Contraceptive Choice, and Public Policy in Zimbabwe," World Bank Economic Review, World Bank Group, vol. 10(1), pages 189-222, January.
    13. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-512, March.
    14. Angrist, Joshua D & Newey, Whitney K, 1991. "Over-Identification Tests in Earnings Functions with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 317-323, July.
    15. King, Elizabeth M. & Lillard, Lee A., 1987. "Education policy and schooling attainment in Malaysia and the Philippines," Economics of Education Review, Elsevier, vol. 6(2), pages 167-181, April.
    16. Kristin F. Butcher & Anne Case, 1994. "The Effect of Sibling Sex Composition on Women's Education and Earnings," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 531-563.
    17. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    18. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    19. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
    20. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630 Elsevier.
    21. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-1286, December.
    22. Orley Ashenfelter & David J. Zimmerman, 1997. "Estimates Of The Returns To Schooling From Sibling Data: Fathers, Sons, And Brothers," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 1-9, February.
    23. Paul Schultz, T., 2003. "Wage rentals for reproducible human capital: evidence from Ghana and the Ivory Coast," Economics & Human Biology, Elsevier, vol. 1(3), pages 331-366, December.
    24. Rosenzweig, Mark R. & Wolpin, Kenneth I., 1982. "Governmental interventions and household behavior in a developing country : Anticipating the unanticipated consequences of social programs," Journal of Development Economics, Elsevier, vol. 10(2), pages 209-225, April.
    25. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    26. Strauss, J. & Thomas, D., 1991. "Wages, Schooling and Background: Investments in Men and Women in Urban Brazil," Papers 649, Yale - Economic Growth Center.
    27. Pitt, Mark M & Rosenzweig, Mark R & Gibbons, Donna M, 1993. "The Determinants and Consequences of the Placement of Government Programs in Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 319-348, September.
    28. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-1173, December.
    29. repec:fth:prinin:317 is not listed on IDEAS
    30. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    31. 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.
    32. Schultz, T. Paul, 1997. "Assessing the productive benefits of nutrition and health: An integrated human capital approach," Journal of Econometrics, Elsevier, vol. 77(1), pages 141-158, March.
    33. Sahn, David E. & Alderman, Harold, 1988. "The effects of human capital on wages, and the determinants of labor supply in a developing country," Journal of Development Economics, Elsevier, vol. 29(2), pages 157-183, September.
    34. Jacoby, Hanan G, 1994. "Borrowing Constraints and Progress through School: Evidence from Peru," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 151-160, February.
    35. Rosenzweig, Mark R & Wolpin, Kenneth I, 1986. "Evaluating the Effects of Optimally Distributed Public Programs: ChildHealth and Family Planning Interventions," American Economic Review, American Economic Association, vol. 76(3), pages 470-482, June.
    36. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-946, December.
    37. Glewwe, Paul, 1996. "The relevance of standard estimates of rates of return to schooling for education policy: A critical assessment," Journal of Development Economics, Elsevier, vol. 51(2), pages 267-290, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jose Ramon Albert & Soya Mori & Celia Reyes & Aubrey D. Tabuga & Tatsufumi Yamagata, 2015. "Income Disparity among Persons with Disabilities, Assessed by Education and Sex: Accentuated Gender Difference Found in Metro Manila, the Philippines," The Developing Economies, Institute of Developing Economies, vol. 53(4), pages 289-302, December.
    2. Alan B. Krueger & Mikael Lindahl, 1998. "Education for Growth in Sweden and the World," Working Papers 790, Princeton University, Department of Economics, Industrial Relations Section..
    3. Harry Patrinos & Chris Sakellariou, 2005. "Schooling and Labor Market Impacts of a Natural Policy Experiment," LABOUR, CEIS, vol. 19(4), pages 705-719, December.
    4. Emek Basker, 2007. "When Good Instruments Go Bad," Working Papers 0706, Department of Economics, University of Missouri.
    5. Uwaifo, Ruth, 2006. "Africa's Education Enigma? The Nigerian story," 2006 Annual meeting, July 23-26, Long Beach, CA 21254, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Lawrence Dacuycuy, 2012. "Parametric and semiparametric model representations of the conditional mean of wages: do they make a difference against nonparametric ones?," Applied Economics, Taylor & Francis Journals, vol. 44(13), pages 1673-1684, May.
    7. Deng, Binbin, 2010. "Schooling and Wage Revisited: Does Higher IQ Really Give You Higher Income?," MPRA Paper 23206, University Library of Munich, Germany.
    8. Esther Duflo, 2001. "Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment," American Economic Review, American Economic Association, vol. 91(4), pages 795-813, September.
    9. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
    10. Chris Sakellariou, 2006. "Education policy reform, local average treatment effect and returns to schooling from instrumental variables in the Philippines," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 473-481.
    11. Uwaifo Oyelere, Ruth, 2010. "Africa's education enigma? The Nigerian story," Journal of Development Economics, Elsevier, vol. 91(1), pages 128-139, January.
    12. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    13. Sonia Bhalotra & Claudia Sanhueza, 2004. "Parametric and Semi-parametric Estimations of the Return to Schooling in South Africa," Econometric Society 2004 Latin American Meetings 294, Econometric Society.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fpr:fcnddp:54. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/ifprius.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.