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Heterogeneous Economic Returns to Postsecondary Degrees: Evidence from Chile

  • Loreto Reyes
  • Jorge Rodríguez
  • Sergio S. Urzúa

We analyze the economic returns to different postsecondary degrees in Chile. We posit a schooling decision model with unobserved ability, observed test scores and labor market outcomes. We benefit from administrative records to carry out our empirical strategy. Our results show positive average returns to postsecondary degrees, especially for five-year degrees. However, we also uncover a large fraction of individuals with realized negative net returns. Although psychic benefits of postsecondary education could rationalize this result, we argue this might also suggest that individuals lack information at the time schooling decisions are made. Finally, our findings illustrate the importance of allowing for heterogeneous treatment effects when making policy recommendations.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18817.

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Date of creation: Feb 2013
Date of revision:
Handle: RePEc:nbr:nberwo:18817
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  1. Matías Busso & Marina Bassi & Sergio Urzúa & Jaime Vargas, 2012. "Disconnected: Skills, Education, and Employment in Latin America," IDB Publications (Books), Inter-American Development Bank, number 79504.
  2. Robert J. Willis & Sherwin Rosen, 1978. "Education and Self-Selection," NBER Working Papers 0249, National Bureau of Economic Research, Inc.
  3. James J. Heckman & John Eric Humphries & Sergio Urzua & Gregory Veramendi, 2010. "The effects of educational choices on labor market, health, and social outcomes," Working Papers 2011-002, Human Capital and Economic Opportunity Working Group.
  4. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
  5. James J. Heckman & Sergio Urzua & Edward Vytlacil, 2006. "Understanding Instrumental Variables in Models with Essential Heterogeneity," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 389-432, August.
  6. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  7. Heckman, James J. & Navarro, Salvador, 2005. "Dynamic Discrete Choice and Dynamic Treatment Effects," IZA Discussion Papers 1790, Institute for the Study of Labor (IZA).
  8. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
  9. 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.
  10. Sergio Urzúa, 2008. "Racial Labor Market Gaps: The Role of Abilities and Schooling Choices," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  11. Dante Contreras & Emerson Melo & Susana Ojeda, 2005. "¿Estimando el retorno a la educación o a los no observables?: evidencia de datos de panel," Estudios de Economia, University of Chile, Department of Economics, vol. 32(2 Year 20), pages 187-199, December.
  12. Claudio Sapelli, 2003. "Ecuaciones de Mincer y las Tasas de Retorno a la Educación en Chile: 1990-1998," Documentos de Trabajo 254, Instituto de Economia. Pontificia Universidad Católica de Chile..
  13. Thomas J. Kane, 1996. "College Cost, Borrowing Constraints and the Timing of College Entry," Eastern Economic Journal, Eastern Economic Association, vol. 22(2), pages 181-194, Spring.
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