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Education, Earnings, and the "Canadian G.I. Bill"

  • Thomas Lemieux
  • David Card

We use the unique experiences of Canadian World War II veterans to identify the effects of a large scale college subsidy program on educational attainment and earnings. Like the United States, Canada set up an extensive veteran's assistance program that provided financial aid and institutional support for college attendance. Because of differences in military enlistment rates and education systems, however, a much lower fraction of Quebec men benefited from VRA benefits than men from other provinces. Building on this fact, we analyze inter-cohort patterns of education and earnings for English- speaking men from Ontario, using French-speaking men from Quebec as a control group. We use data from the 1971 and 1981 Canadian Censuses to compare conventional (OLS) estimates of the return to schooling with instrumental variables (IV) estimates that use potential eligibility for VRA benefits as an exogenous determinant of schooling. Consistent with the recent literature, we find that the IV estimates are typically as big or bigger than the corresponding OLS estimates. We also explore an alternative identification strategy that utilizes information on family background available in the 1973 Canadian Job Mobility Survey. We hypothesize that veterans from relatively disadvantaged family backgrounds were more likely to be affected by the VRA's incentives than veterans from wealthier families. Using the interaction of veteran status and family background as an instrument for schooling, we again find rates of return to education as large or larger than the corresponding OLS estimates.

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File URL: http://www.nber.org/papers/w6718.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6718.

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Date of creation: Sep 1998
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Publication status: published as Canadian Journal of Economics, Vol. 34, no. 2 (May 2001): 313-344
Handle: RePEc:nbr:nberwo:6718
Note: LS
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  1. Elchanan Cohn & John Addison, 1998. "The Economic Returns to Lifelong Learning in OECD Countries," Education Economics, Taylor & Francis Journals, vol. 6(3), pages 253-307.
  2. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December.
  3. Joshua D. Angrist & Guido W. Imbens, 1995. "Average Causal Response with Variable Treatment Intensity," NBER Technical Working Papers 0127, National Bureau of Economic Research, Inc.
  4. John Bound & David A. Jaeger, 1996. "On the Validity of Season of Birth as an Instrument in Wage Equations: A Comment on Angrist & Krueger's "Does Compulsory School Attendance Affect Scho," NBER Working Papers 5835, National Bureau of Economic Research, Inc.
  5. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 533-575, May.
  6. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
  7. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  8. Andrea Ichino & Rudolf Winter-Ebmer, 2004. "The Long-Run Educational Cost of World War II," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 57-86, January.
  9. Joshua Angrist & Alan Krueger, 1989. "Why Do World War II Veterans Earn More Than Nonveterans?," Working Papers 634, Princeton University, Department of Economics, Industrial Relations Section..
  10. Wooldridge, Jeffrey M., 1997. "On two stage least squares estimation of the average treatment effect in a random coefficient model," Economics Letters, Elsevier, vol. 56(2), pages 129-133, October.
  11. Joshua D. Angrist, 1990. "The Draft Lottery and Voluntary Enlistment in the Vietnam Era," NBER Working Papers 3514, National Bureau of Economic Research, Inc.
  12. van der Klaauw, Wilbert, 1997. "A Regression-Discontinuity Evaluation of the Effect of Financial Aid Offers on College Enrollment," Working Papers 97-10, C.V. Starr Center for Applied Economics, New York University.
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