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Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems

Listed author(s):
  • David Card

This paper reviews a set of recent studies that have attempted to measure the causal effect of education on labor market earnings by using institutional features of the supply side of the education system as exogenous determinants of schooling outcomes. A simple theoretical model that highlights the role of comparative advantage in the optimal schooling decision is presented and used to motivate an extended discussion of econometric issues, including the properties of ordinary least squares and instrumental variables estimators. A review of studies that have used compulsory schooling laws, differences in the accessibility of schools, and similar features as instrumental variables for completed education reveals that the resulting estimates of the return to schooling are typically as big or bigger than the corresponding ordinary least squares estimates. One interpretation of this finding is that marginal returns to education among the low-education subgroups typically affected by supply-side innovations tend to relatively high, reflecting their high marginal costs of schooling, rather than low ability that limits their return to education.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7769.

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Date of creation: Jun 2000
Publication status: published as Card, David. "Estimating The Return To Schooling: Progress On Some Persistent Econometric Problems," Econometrica, 2001, v69(5,Sep), 1127-1160.
Handle: RePEc:nbr:nberwo:7769
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  5. Joshua D. Angrist & Kathryn Graddy & Guido W. Imbens, 1995. "Non-Parametric Demand Analysis with an Application to the Demand for Fish," NBER Technical Working Papers 0178, National Bureau of Economic Research, Inc.
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  24. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
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  28. Ichino, A. & Winter-Ebmer, R., 1998. "The Long-Run Education Cost of World War II. Example of Local Average Treatment Effect Estimation," Economics Working Papers eco98/10, European University Institute.
  29. Ichino, Andrea & Winter-Ebmer, Rudolf, 1998. "The Long-Run Educational Cost of World War II: An Example of Local Average Treatment Effect Estimation," CEPR Discussion Papers 1895, C.E.P.R. Discussion Papers.
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  34. David Card & Thomas Lemieux, 2001. "Dropout and Enrollment Trends in the Postwar Period: What Went Wrong in the 1970s?," NBER Chapters, in: Risky Behavior among Youths: An Economic Analysis, pages 439-482 National Bureau of Economic Research, Inc.
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  37. 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.
  38. Ashenfelter, Orley & Harmon, Colm & Oosterbeek, Hessel, 1999. "A review of estimates of the schooling/earnings relationship, with tests for publication bias," Labour Economics, Elsevier, vol. 6(4), pages 453-470, November.
  39. Henry S. Farber & Jeffrey R. Kling & Alan Krueger, 1999. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," Working Papers 794, Princeton University, Department of Economics, Industrial Relations Section..
  40. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  41. J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc.
  42. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  43. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule to Estimate the Effect of Class Size on Scholastic Achievement," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 533-575.
  44. Stephen Cameron & Christopher Taber, 2000. "Borrowing Constraints and the Returns to Schooling," NBER Working Papers 7761, National Bureau of Economic Research, Inc.
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