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Ability, families, education and earnings in Britain

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  • Lorraine Dearden

    (Institute for Fiscal Studies and University College London)

Abstract

The paper estimates the returns to education for a cohort of individuals born in Britain in March 1958 who have been followed since birth until the age of 33. The data used has a wealth of information on family background including parental education, social class and interest shown in the child's education as well as measures of ability. These variables are typically missing in studies looking at the returns to schooling. In the paper we Ud that the return to an additional year of full-time education for the UK population as a whole is somewhere between 5 to 7 per cent for men and 8 to 10 per cent for women even after correcting for the ehcts of measurement error. The paper also presents evidence that the returns to an additional year of schooling in the UK are heterogeneous. The results from the paper suggest that individuals undertaking education involving some sort of formal qualification have significantly larger rates of return to an additional year of education than individuals who have obtained no formal education. Individuals whose highest educational qualification is an A level (the highest schooling qualification in the UK) appear to have the highest average return to an additional year of education at around 15 per cent for both men and women. There is also some evidence that individuals with lower tastes for education, have significantly higher marginal returns to education. The results of the paper suggest that recent IV estimates of the returns to schooling in the UK, which exceed typical OLS estimates, may overestimate the average marginal return for the population as a whole.

Suggested Citation

  • Lorraine Dearden, 1998. "Ability, families, education and earnings in Britain," IFS Working Papers W98/14, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:98/14
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    References listed on IDEAS

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    Cited by:

    1. L Feinstein, 2000. "The Relative Economic Importance of Academic, Psychological and Behavioural Attributes Developed on Chilhood," CEP Discussion Papers dp0443, Centre for Economic Performance, LSE.
    2. Sanjaya DeSilva & Mohammed Mehrab Bin Bakhtiar, 2011. "Women, Schooling, and Marriage in Rural Philippines," Economics Working Paper Archive wp_701, Levy Economics Institute.
    3. Arnaud Chevalier & Tarja K. Viitanen & Tarja K. Viitanen, 2003. "The long-run labour market consequences of teenage motherhood in Britain," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(2), pages 323-343, May.
    4. Anna Vignoles & Augustin De Coulon & Oscar Marcenaro-Gutierrez, 2011. "The value of basic skills in the British labour market," Oxford Economic Papers, Oxford University Press, vol. 63(1), pages 27-48, January.
    5. Dearden, Lorraine, 1999. "The effects of families and ability on men's education and earnings in Britain1," Labour Economics, Elsevier, vol. 6(4), pages 551-567, November.
    6. Strohner, Ludwig & Berger, Johannes & Thomas, Tobias, 2020. "Bildung als Motor für die wirtschaftliche Entwicklung," Policy Notes 33, EcoAustria – Institute for Economic Research.
    7. Del Bono, Emilia & Galindo-Rueda, Fernando, 2006. "The long term impacts of compulsory schooling: evidence from a natural experiment in school leaving dates," ISER Working Paper Series 2006-44, Institute for Social and Economic Research.
    8. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2003. "Evaluating the impact of education on earnings in the UK: Models, methods and results from the NCDS," IFS Working Papers W03/20, Institute for Fiscal Studies.
    9. Lorraine Dearden, 1999. "Qualifications and earnings in Britain: how reliable are conventional OLS estimates of the returns to education?," IFS Working Papers W99/07, Institute for Fiscal Studies.
    10. Wen Fan, 2012. "Estimating the Return to College in Britain Using Regression and Propensity Score Matching," LABOUR, CEIS, vol. 26(1), pages 31-45, March.
    11. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, April.
    12. Iacovou, Maria, 2001. "Family composition and children’s educational outcomes," ISER Working Paper Series 2001-12, Institute for Social and Economic Research.
    13. Berrittella, Maria & Dardanoni, Valentino, 2016. "Nonlinearity in intergenerational income transmission: A cross-country analysis," Economic Analysis and Policy, Elsevier, vol. 52(C), pages 1-10.
    14. Trostel, Philip & Walker, Ian & Woolley, Paul, 2002. "Estimates of the economic return to schooling for 28 countries," Labour Economics, Elsevier, vol. 9(1), pages 1-16, February.
    15. Arnaud Chevalier & Gauthier Lanot, 2001. "The relative effect of family and financial characteristics on educational echievement," CEE Discussion Papers 0008, Centre for the Economics of Education, LSE.
    16. Günther Fink & Evan Peet, 2016. "Returns to Education in Low and Middle-Income Countries: Evidence from the Living Standards and Measurement Surveys," PGDA Working Papers 12014, Program on the Global Demography of Aging.
    17. Galasi, Péter, 2009. "A túl- és az alulképzés bérhozama 25 európai országban [Returns for over-education and under-education for 25 European countries]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 197-215.
    18. Marco Francesconi, 2005. "An evaluation of the childhood family structure measures from the sixth wave of the British Household Panel Survey," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 539-566, July.
    19. Battu, Harminder & Belfield, Clive R. & Sloane, Peter J., 2001. "Human Capital Spill-Overs Within the Workplace," IZA Discussion Papers 404, Institute of Labor Economics (IZA).
    20. Del Bono, Emilia, 2004. "Pre-Marital Fertility and Labour Market Opportunities: Evidence from the 1970 British Cohort Study," IZA Discussion Papers 1320, Institute of Labor Economics (IZA).
    21. Arnaud Chevalier & Gauthier Lanot, 2002. "The Relative Effect of Family Characteristics and Financial Situation on Educational Achievement," Education Economics, Taylor & Francis Journals, vol. 10(2), pages 165-181.
    22. Asplund, Rita & Pereira, Pedro Telhado (ed.), . "Returns to Human Capital in Europe. A Literature Review," ETLA B, The Research Institute of the Finnish Economy, number 156.

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