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The Effects of For-Profit College Training on Earnings

In this paper, I obtain the estimates of the effects of for-profit training and credentials on students' annualized earnings. I differentiate for-profit students by the program level and account for students' self-selection into for-profit sector. I formulate the evaluation as the series progressing in the assumption on the source of selection bias: a basic specification of the Mincer earnings model is followed up by the rich-covariate model of selection on observables and finally by the multinomial model of selection into for-profit postsecondary training. To identify the selection into for-profit training, I use two exclusion restrictions: state-specific community college tuition, and county-specific share of Title-IV eligible for-profit schools. I find that selection into employment is not a pressing issue with for-profit college trained workers. Also, after controlling for self-selection into for-profit sector I find that on average a receipt of a for-profit certificate is associated with an increase in individual annualized earnings. However, this finding varies by gender, so I investigate various explanations for this gender divide. I observe that the differences in earnings effects between men and women are not systematically related to occupational differences by gender. Also, there may be some merit to the claim that the lack of the significant effects of for-profit Associate degrees for males are due to the unrelated vocational training.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18972.

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Date of creation: Dec 2008
Date of revision: May 2009
Handle: RePEc:pra:mprapa:18972
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  1. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2003. "Evaluating the impact of education on earnings in the UK: Models, methods and results from the NCDS," IFS Working Papers W03/20, Institute for Fiscal Studies.
  2. Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," RCER Working Papers 488, University of Rochester - Center for Economic Research (RCER).
  3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  4. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2005. "Evaluating the effect of education on earnings: models, methods and results from the National Child Development Survey," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 473-512.
  5. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, Elsevier.
  6. Chung, Anna, 2008. "For-Profit Student Heterogeneity," MPRA Paper 18967, University Library of Munich, Germany, revised Nov 2009.
  7. Dave E. Marcotte, 2010. "The Earnings Effect Of Education At Community Colleges," Contemporary Economic Policy, Western Economic Association International, vol. 28(1), pages 36-51, 01.
  8. Ana M. Ferrer & W. Craig Riddell, 2002. "The role of credentials in the Canadian labour market," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 879-905, November.
  9. Jaeger, David A & Page, Marianne E, 1996. "Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 733-40, November.
  10. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
  11. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March.
  12. Chung, Anna, 2008. "The Choice of For-Profit College," MPRA Paper 18971, University Library of Munich, Germany, revised Nov 2009.
  13. Kane, Thomas J & Rouse, Cecilia Elena, 1995. "Labor-Market Returns to Two- and Four-Year College," American Economic Review, American Economic Association, vol. 85(3), pages 600-614, June.
  14. Grubb, W. Norton, 1992. "Postsecondary vocational education and the sub-baccalaureate labor market: New evidence on economic returns," Economics of Education Review, Elsevier, vol. 11(3), pages 225-248, September.
  15. De Hoyos, R.E., 2006. "Structural Modelling of Female Labour Participation and Occupation Decisions," Cambridge Working Papers in Economics 0611, Faculty of Economics, University of Cambridge.
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