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How Large are the Social Returns to Education? Evidence from Compulsory Schooling Laws

  • Daron Acemoglu
  • Joshua Angrist

Average schooling in US states is highly correlated with state wage levels, even after controlling for the direct effect of schooling on individual wages. We use an instrumental variables strategy to determine whether this relationship is driven by social returns to education. The instrumentals for average schooling are derived from information on the child labor laws and compulsory attendance laws that affected men in our Census samples, while quarter of birth is used as an instrument for individual schooling. This results in precisely estimated private returns to education of about seven percent, and small social returns, typically less than one percent, that are not significantly different from zero.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7444.

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Date of creation: Dec 1999
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Publication status: published as Acemoglu, D. (ed.) Recent Developments in Growth Theory. Edward Elgar Publishing Ltd, 2004.
Handle: RePEc:nbr:nberwo:7444
Note: EFG LS PE
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  15. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
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  25. Angrist, Joshua D & Krueger, Alan B, 1995. "Split-Sample Instrumental Variables Estimates of the Return to Schooling," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 225-35, April.
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