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Nature, nurture and market conditions: Ability and education in the policy evaluation approach

Author

Listed:
  • Bernarda Zamora Talaya

    (Universidad de Alicante)

  • Eduard Gracia

    (Booz Allen Hamilton)

Abstract

The present paper follows the rationality of the Human Capital Theory to explain the heterogeneity of returns to schooling in a policy evaluation model with the purpose of testing whether people are blocked in any way (credit constraints, uncertainty or other market environment conditions) when they make their schooling choices. The minimal assumption that abler people face lower costs of schooling guarantees the possibility of making the right choice in this framework. The empirical implications of the model are extended further from the properties of ordinary least squares and instrumental variable estimators and centred on predictions about the sign of different policy evaluation parameters (sorting gains and selection biases) and on the shape and variability of marginal returns to education. Within this framework, the paper revises the modern empirical literature on returns to schooling in combination with the theoretical literature on human capital. Empirical evidence for the U.S., shown by a binary choice model, supports the assumption. Evidence obtained from Spanish data in a sequential choice setting does not support the assumption.

Suggested Citation

  • Bernarda Zamora Talaya & Eduard Gracia, 2007. "Nature, nurture and market conditions: Ability and education in the policy evaluation approach," Working Papers. Serie AD 2007-29, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2007-29
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2007-29.pdf
    File Function: Fisrt version / Primera version, 2007
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    References listed on IDEAS

    as
    1. 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.
    2. Cunha, Flavio & Heckman, James, 2008. "A New Framework For The Analysis Of Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 315-354, September.
    3. Flavio Cunha & James Heckman & Salvador Navarro, 2005. "Separating uncertainty from heterogeneity in life cycle earnings," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 191-261, April.
    4. Alfonso Alba-Ramírez, 1993. "Mismatch in the Spanish Labor Market: Overeducation?," Journal of Human Resources, University of Wisconsin Press, vol. 28(2), pages 259-278.
    5. Cunha, Flavio & Heckman, James J., 2007. "Identifying and Estimating the Distributions of Ex Post and Ex Ante Returns to Schooling," Labour Economics, Elsevier, vol. 14(6), pages 870-893, December.
    6. Zamarro, Gema, 2010. "Accounting for heterogeneous returns in sequential schooling decisions," Journal of Econometrics, Elsevier, vol. 156(2), pages 260-276, June.
    7. Christopher R. Taber, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 665-691.
    8. 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.
    9. Tobias, J.L., 2000. "Are Return to Schooling Concentrated Among the Most Able? A Semiparametric Analysis of the Ability-Earnings Relationship," Papers 00-01-12, California Irvine - School of Social Sciences.
    10. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    11. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Ability gap; schooling; selection models; heterogeneity;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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