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Education, Health and Wages

  • James Heckman

    ()

    (University of Chicago)

  • John Eric Humphries

    (University of Chicago)

  • Gregory Veramendi

    (Arizona State University)

  • Sergio Urzua

    (University of Maryland)

This paper develops and estimates a model with multiple schooling choices that identifies the causal effect of different levels of schooling on health, health-related behaviors, and labor market outcomes. We develop an approach that is a halfway house between a reduced form treatment effect model and a fully formulated dynamic discrete choice model. It is computationally tractable and identifies the causal effects of educational choices at different margins. We estimate distributions of responses to education and find evidence for substantial heterogeneity in unobserved variables on which agents make choices. The estimated treatment effects of education are decomposed into the direct benefits of attaining a given level of schooling and indirect benefits from the option to continue on to further schooling. Continuation values are an important component of our estimated treatment effects. While the estimated causal effects of education are substantial for most outcomes, we also estimate a quantitatively important effect of unobservables on outcomes. Both cognitive and socioemotional factors contribute to shaping educational choices and labor market and health outcomes. We improve on LATE by identifying the groups affected by variations in the instruments. We find benefits of cognition on most outcomes apart from its effect on schooling attainment. The benefits of socioemotional skills on outcomes beyond their effects on schooling attainment are less precisely estimated.

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File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/HHUV_Education_Health_Wages_revised.pdf
File Function: First version, 3/3/2014
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Paper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2014-007.

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Date of creation: Mar 2014
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Handle: RePEc:hka:wpaper:2014-007
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  1. Sergio Urzua & James J. Heckman, 2009. "Comparing IV with Structural Models: What Simple IV Can and Cannot Identify," Working Papers 200906, Geary Institute, University College Dublin.
  2. Lars Peter Hansen & Thomas J. Sargent, 1979. "Formulating and estimating dynamic linear rational expectations models," Working Papers 127, Federal Reserve Bank of Minneapolis.
  3. Borghans Lex & Golsteyn Bart H.H. & Heckman James & Humphries John Eric, 2011. "Identification Problems in Personality Psychology," Research Memorandum 025, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  4. Susanne Schennach & James Heckman & Flavio Cunha, 2007. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," 2007 Meeting Papers 973, Society for Economic Dynamics.
  5. M. Christopher Auld & Nirmal Sidhu, 2004. "Schooling, cognitive ability, and health," HEW 0405005, EconWPA.
  6. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  7. Hansen, Karsten T. & Heckman, James J. & Mullen, Kathleen, 2003. "The Effect of Schooling and Ability on Achievement Test Scores," IZA Discussion Papers 826, Institute for the Study of Labor (IZA).
  8. James Heckman & Rodrigo Pinto & Peter Savelyev, 2013. "Understanding the Mechanisms through Which an Influential Early Childhood Program Boosted Adult Outcomes," American Economic Review, American Economic Association, vol. 103(6), pages 2052-86, October.
  9. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  10. Arendt, Jacob Nielsen, 2005. "Does education cause better health? A panel data analysis using school reforms for identification," Economics of Education Review, Elsevier, vol. 24(2), pages 149-160, April.
  11. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  12. John Cawley & Christopher Ruhm, 2011. "The Economics of Risky Health Behaviors," NBER Working Papers 17081, National Bureau of Economic Research, Inc.
  13. Joseph G. Altonji, 1991. "The Demand for and Return to Education When Education Outcomes are Uncertain," NBER Working Papers 3714, National Bureau of Economic Research, Inc.
  14. Borghans Lex & Lee Duckworth Angela & Heckman James J. & Weel Bas ter, 2008. "The Economics and Psychology of Personality Traits," ROA Research Memorandum 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  15. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Gianluca Violante, 2013. "Education Policy and Intergenerational Transfers in Equilibrium," Working Papers 2013-010, Human Capital and Economic Opportunity Working Group.
  16. Peter Arcidiacono & Patrick J. Bayer & Jason R. Blevins & Paul Ellickson, 2010. "Estimation of Dynamic Discrete Choice Models in Continuous Time," Working Papers 10-49, Duke University, Department of Economics.
  17. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding differences in health behaviors by education," Journal of Health Economics, Elsevier, vol. 29(1), pages 1-28, January.
  18. Adriana Lleras-Muney, 2005. "The Relationship Between Education and Adult Mortality in the United States," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 189-221.
  19. Silles, Mary A., 2009. "The causal effect of education on health: Evidence from the United Kingdom," Economics of Education Review, Elsevier, vol. 28(1), pages 122-128, February.
  20. Scott Adams, 2002. "Educational Attainment and Health: Evidence from a Sample of Older Adults," Education Economics, Taylor & Francis Journals, vol. 10(1), pages 97-109.
  21. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding Differences in Health Behaviors by Education," Scholarly Articles 5344195, Harvard University Department of Economics.
  22. Heckman, James J. & Navarro, Salvador, 2005. "Dynamic Discrete Choice and Dynamic Treatment Effects," IZA Discussion Papers 1790, Institute for the Study of Labor (IZA).
  23. 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.
  24. Comay, Yochanan & Melnik, A & Pollatschek, M A, 1973. "The Option Value of Education and the Optimal Path for Investment in Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 421-35, June.
  25. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
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