IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Return to Schooling in Structural Dynamic Models: A Survey

  • Christian Belzil

    ()

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

This papers contains a survey of the recent literature devoted to the returns to schooling within a dynamic structural framework. I present a historical perspective on the evolution of the literature, from early static models set in a selectivity framework (Willis and Rosen, 1979) to the recent literature, stimulated by Keane and Wolpin (1997), and which uses stochastic dynamic programming techniques. After reviewing the literature thoroughly, I compare the structural approach with the IV (experimental) approach. I present their commonalities and I also discuss their fundamental di8erences. To get an order of magnitude, most structural estimates reported for the US range between 4% and 7% per year. On the other hand, IV estimates between 10% and 15% per year are often reported. The discrepancy prevails even when comparable (if not identical) data sets are used. The discussion is focussed on understanding this divergence. The distinction between static and dynamic model specifications is a recurrent theme in the analysis. I argue that the distinction between the IV approach and the structural approach may be coined in terms of a trade o8 between behavioral and statistical assumptions. For this reason, and unless one has very specific knowledge of the true data generating process, it is neither possible, nor sensible, to claim which approach to estimation is more flexible. More precisely, I show that structural and IV approaches differ mainly at the level of i) the compatibility of the underlying models with truly dynamic behavior, ii) the role of heterogeneity in ability and tastes, iii) the consideration of post-schooling opportunities, and (iv) the specification (and interpretation) of the Mincer wage equation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://halshs.archives-ouvertes.fr/docs/00/14/25/38/PDF/0609.pdf
Download Restriction: no

Paper provided by HAL in its series Post-Print with number halshs-00142538.

as
in new window

Length:
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:hal:journl:halshs-00142538
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00142538/en/
Contact details of provider: Web page: http://hal.archives-ouvertes.fr/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Carneiro, Pedro & Hansen, Karsten & Heckman, James, 2003. "Estimating distributions of treatment effects with an application to the returns to schooling and measurement of the effects of uncertainty on college choice," Working Paper Series 2003:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  2. Cohen Goldner, Sarit & Eckstein, Zvi, 2004. "Estimating the Return to Training and Occupational Experience: The Case of Female Immigrants," IZA Discussion Papers 1225, Institute for the Study of Labor (IZA).
  3. Christian Belzil & J�rgen Hansen, 2002. "Unobserved Ability and the Return to Schooling," Econometrica, Econometric Society, vol. 70(5), pages 2075-2091, September.
  4. Hotz, V.J. & Miller, R.A., 1991. "Conditional Choice Probabilities and the Estimation of Dynamic Models," GSIA Working Papers 1992-12, Carnegie Mellon University, Tepper School of Business.
  5. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2005. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," NBER Working Papers 11544, National Bureau of Economic Research, Inc.
  6. Belzil, Christian & Leonardi, Marco, 2006. "Can Risk Aversion Explain Schooling Attainments? Evidence from Italy," IZA Discussion Papers 2123, Institute for the Study of Labor (IZA).
  7. Christian Belzil & Jörgen Hansen, 2002. "A Structural Analysis of the Correlated Random Coefficient Wage Regression Model," CIRANO Working Papers 2002s-07, CIRANO.
  8. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
  9. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  10. Thierry Magnac & David Thesmar, 2002. "Identifying Dynamic Discrete Decision Processes," Econometrica, Econometric Society, vol. 70(2), pages 801-816, March.
  11. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects, and Econometric Policy Evaluation," Econometrica, Econometric Society, vol. 73(3), pages 669-738, 05.
  12. Heckman, James J. & Navarro, Salvador, 2007. "Dynamic discrete choice and dynamic treatment effects," Journal of Econometrics, Elsevier, vol. 136(2), pages 341-396, February.
  13. Eckstein, Zvi & van den Berg, Gerard J, 2004. "Empirical Labour Search: A Survey," CEPR Discussion Papers 4199, C.E.P.R. Discussion Papers.
  14. Christian BELZIL, 2008. "Testing the Specification of the Mincer Wage Equation," Annales d'Economie et de Statistique, ENSAE, issue 91-92, pages 427-451.
  15. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  16. Eckstein, Zvi & Wolpin, Kenneth, 1998. "Youth Employment and Academic Performance in High School," CEPR Discussion Papers 1861, C.E.P.R. Discussion Papers.
  17. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
  18. Sarit Cohen-Goldner & Zvi Eckstein, 2008. "Labor Mobility Of Immigrants: Training, Experience, Language, And Opportunities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 837-872, 08.
  19. Robert M. Sauer, 2004. "Educational Financing and Lifetime Earnings," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1189-1216.
  20. Edward Vytlacil, 2002. "Independence, Monotonicity, and Latent Index Models: An Equivalence Result," Econometrica, Econometric Society, vol. 70(1), pages 331-341, January.
  21. Donghoon Lee & Kenneth I. Wolpin, 2004. "Intersectoral Labor Mobility and the Growth of the Service Sector," PIER Working Paper Archive 04-036, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  22. Christian Belzil, 2007. "Subjective Beliefs and Schooling Decisions," Working Papers 0717, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  23. Belzil, Christian & Hansen, Jörgen, 2003. "Structural Estimates of the Intergenerational Education Correlation," IZA Discussion Papers 973, Institute for the Study of Labor (IZA).
  24. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
  25. 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.
  26. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  27. Michael P. Keane & Kenneth I. Wolpin, 1994. "The solution and estimation of discrete choice dynamic programming models by simulation and interpolation: Monte Carlo evidence," Staff Report 181, Federal Reserve Bank of Minneapolis.
  28. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  29. Ham, John C & LaLonde, Robert J, 1996. "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training," Econometrica, Econometric Society, vol. 64(1), pages 175-205, January.
  30. Eckstein, Zvi & Mortensen, Dale T., 2006. "Labor search," European Economic Review, Elsevier, vol. 50(4), pages 807-810, May.
  31. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  32. Cunha, Flavio & Heckman, James J. & Navarro, Salvador, 2004. "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," IZA Discussion Papers 1437, Institute for the Study of Labor (IZA).
  33. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  34. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 535-60, June.
  35. Thierry MAGNAC & David THESMAR, 2002. "Analyse économique des politiques éducatives : l'Augmentation de la scolarisation en France de 1982 à 1993," Annales d'Economie et de Statistique, ENSAE, issue 65, pages 1-33.
  36. Keane, Michael P., 2010. "Structural vs. atheoretic approaches to econometrics," Journal of Econometrics, Elsevier, vol. 156(1), pages 3-20, May.
  37. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
  38. Ariel Pakes, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," NBER Working Papers 1340, National Bureau of Economic Research, Inc.
  39. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October.
  40. 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.
  41. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
  42. Kenneth I. Wolpin & Mark R. Rosenzweig, 2000. "Natural "Natural Experiments" in Economics," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 827-874, December.
  43. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
  44. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  45. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  46. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  47. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  48. Lars Peter Hansen & Thomas J. Sargent, 1980. "Linear rational expectations models for dynamically interrelated variables," Working Papers 135, Federal Reserve Bank of Minneapolis.
  49. Eckstein, Zvi & Wolpin, Kenneth I, 1989. "Dynamic Labour Force Participation of Married Women and Endogenous Work Experience," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 375-90, July.
  50. Thomas Lemieux & David Card, 1998. "Education, Earnings, and the "Canadian G.I. Bill"," NBER Working Papers 6718, National Bureau of Economic Research, Inc.
  51. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  52. Eckstein, Z. & Wolpin, K.I., 1992. "Duration to First Job and the Return to Schooling : Estimates form a Search -Matching Model," Papers 13-92, Tel Aviv.
  53. Wolpin, Kenneth I, 1984. "An Estimable Dynamic Stochastic Model of Fertility and Child Mortality," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 852-74, October.
  54. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00142538. 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: (CCSD)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.