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Persistence Bias and Schooling Returns

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  • Andini, Corrado

    () (University of Madeira)

Abstract

A well-established empirical literature suggests that individual wages are persistent. Several theoretical arguments support this empirical finding. Yet, the standard approach to the estimation of schooling returns does not account for this fact. This paper investigates the consequences of disregarding earnings persistence. In particular, it shows that the most commonly used static-model estimators of schooling coefficients are subject to an omitted-variable bias which can be named "persistence bias".

Suggested Citation

  • Andini, Corrado, 2014. "Persistence Bias and Schooling Returns," IZA Discussion Papers 8143, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8143
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    References listed on IDEAS

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    1. Rietveld, Cornelius A. & Webbink, Dinand, 2016. "On the genetic bias of the quarter of birth instrument," Economics & Human Biology, Elsevier, vol. 21(C), pages 137-146.

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    More about this item

    Keywords

    schooling; wages; dynamic panel-data models;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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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