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Estimating Marginal Returns to Education

Author

Listed:
  • Carneiro, Pedro

    () (University College London)

  • Heckman, James J.

    () (University of Chicago)

  • Vytlacil, Edward

    () (Yale University)

Abstract

This paper estimates the marginal returns to college for individuals induced to enroll in college by different marginal policy changes. The recent instrumental variables literature seeks to estimate this parameter, but in general it does so only under strong assumptions that are tested and found wanting. We show how to utilize economic theory and local instrumental variables estimators to estimate the effect of marginal policy changes. Our empirical analysis shows that returns are higher for individuals more likely to attend college. We contrast the returns to well-defined marginal policy changes with IV estimates of the return to schooling. Some marginal policy changes inducing students into college produce very low returns.

Suggested Citation

  • Carneiro, Pedro & Heckman, James J. & Vytlacil, Edward, 2010. "Estimating Marginal Returns to Education," IZA Discussion Papers 5275, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp5275
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    References listed on IDEAS

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    1. Pedro Carneiro & James J. Heckman & Edward Vytlacil, 2010. "Evaluating Marginal Policy Changes and the Average Effect of Treatment for Individuals at the Margin," Econometrica, Econometric Society, vol. 78(1), pages 377-394, January.
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    3. Hansen, Karsten T. & Heckman, James J. & Mullen, K.J.Kathleen J., 2004. "The effect of schooling and ability on achievement test scores," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 39-98.
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    5. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post--secondary Schooling," Economic Journal, Royal Economic Society, vol. 112(482), pages 705-734, October.
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    More about this item

    Keywords

    returns to schooling; marginal return; marginal treatment effect; average return;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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