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Interpreting Sheepskin Effects in the Returns to Education

Author

Listed:
  • Alfonso Flores-Lagunes

    (University of Arizona)

  • Audrey Light

    (Ohio State University)

Abstract

Researchers often identify sheepskin effects by including degree attainment (D) and years of schooling (S) in a wage model, yet the source of independent variation in these measures is not well understood. We argue that S is negatively correlated with ability among degree-holders because the most able graduate the fastest, while a negative correlation exists among dropouts because the most able benefit from increased schooling. Using data from the NLSY79, we find that wages decrease with S among degree-holders and increase with S among dropouts. The independent variation in S and D needed for identification is not due to reporting error. Instead, we conclude that skill varies systematically among individuals with a given degree status.

Suggested Citation

  • Alfonso Flores-Lagunes & Audrey Light, "undated". "Interpreting Sheepskin Effects in the Returns to Education," Working Papers 22, Princeton University, School of Public and International Affairs, Education Research Section..
    • Handle: RePEc:pri:edures:22
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    References listed on IDEAS

    as
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    Cited by:

    1. John Bound & Sarah Turner, 2007. "Understanding the Increased Time to the Baccalaureate Degree," Discussion Papers 06-043, Stanford Institute for Economic Policy Research.
    2. Schnepf, Sylke V., 2014. "Do Tertiary Dropout Students Really Not Succeed in European Labour Markets?," IZA Discussion Papers 8015, Institute of Labor Economics (IZA).
    3. Sylke V. Schnepf, 2015. "University dropouts and labor market success," IZA World of Labor, Institute of Labor Economics (IZA), pages 182-182, September.

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    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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