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Labor Market Returns to Two- And Four-Year College: Is a Credit a Credit And Do Degrees Matter?

Author

Listed:
  • Thomas J. Kane

    (Harvard University)

  • Cecilia E. Rouse

    (Princeton University)

Abstract

ln CPS data, the 20% of the civilian labor force with 1-3 years of college earn 15% more than high school graduates. We use data from the National Longitudinal Study of the High School Class of I972 which includes postsecondary transcript data and the NLS Y to study the distinct returns to 2-year and 4-year college attendance and degree completion. Controlling for family income and measured ability, wage differentials for both 2-year and 4-year college credits are positive and similar. We find that the average 2-year and 4-year college student earned roughly 5% more than similar high school graduates for every year of credits completed. Second, average bachelor and associate degree recipients did not earn significantly more than those with similar numbers of college credits and no degree, suggesting that the credentialling effects of these degree are small. We report similar results from the NLSY and the CPS. In addition to controlling for family background and ability measures, we pursue two IV strategies to identify measurement error and selection bias. First, we use self-reported education as an instrument for transcript reported education. Second, we use public tuition and distance from the closest 2-year and 4-year colleges as instruments, which we take as orthogonal to schooling measurement error and other unobserved characteristics of college students. Although research over the past decade has been preoccupied with selection bias, the two biases roughly cancel each other, suggesting that the results above are, if anything, understated.

Suggested Citation

  • Thomas J. Kane & Cecilia E. Rouse, 1993. "Labor Market Returns to Two- And Four-Year College: Is a Credit a Credit And Do Degrees Matter?," Working Papers 690, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:311
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    Cited by:

    1. Rahman, Mustafizur & Al-Hasan, Md., 2018. "Returns to Schooling in Bangladesh Revisited: An Instrumental Variable Quantile Regression Approach," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 41(02), pages 27-42, June.
    2. Tansel, Aysit & Keskin, Halil Ibrahim, 2017. "Education Effects on Days Hospitalized and Days out of Work by Gender: Evidence from Turkey," IZA Discussion Papers 11210, Institute of Labor Economics (IZA).
    3. Thomas J. Kane & Cecilia Elena Rouse & Douglas Staiger, 1999. "Estimating Returns to Schooling When Schooling is Misreported," NBER Working Papers 7235, National Bureau of Economic Research, Inc.
    4. Siameh, Celestine O., 2020. "The Impact of Education Reforms on Household Adult Welfare Outcomes in Ethiopia: The 1994 Free Primary Education (FPE) Reform," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304567, Agricultural and Applied Economics Association.
    5. David Card & Alan B. Krueger, 1996. "School Resources and Student Outcomes: An Overview of the Literature and New Evidence from North and South Carolina," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 31-50, Fall.
    6. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
    7. John Giles & Albert Park & Meiyan Wang, 2019. "The Great Proletarian Cultural Revolution, Disruptions to Education, and the Returns to Schooling in Urban China," Economic Development and Cultural Change, University of Chicago Press, vol. 68(1), pages 131-164.
    8. Nikolov, Plamen & Jimi, Nusrat & Chang, Jerray, 2020. "The Importance of Cognitive Domains and the Returns to Schooling in South Africa: Evidence from Two Labor Surveys," Labour Economics, Elsevier, vol. 65(C).
    9. Diana E. Clark & Chang-Tai Hsieh, 2000. "Schooling and Labor Market Impact of the 1968 Nine-Year Education Program in Taiwan," Working Papers 215, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    10. A. Abigail Payne & Aloysius Siow, 1998. "Estimating the Effects of Federal Research Funding on Universities using Alumni Representation on Congressional Appropriations Committees," Working Papers siow-99-02, University of Toronto, Department of Economics.
    11. Daeheon Choi & Chune Young Chung & Ha Truong, 2019. "Return on Education in Two Major Vietnamese Cities," Sustainability, MDPI, Open Access Journal, vol. 11(18), pages 1-30, September.
    12. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
    13. Aysit Tansel & Halil Ibrahim Keskin, 2017. "Education Effects on Days Hospitalized and Days out of Work by Gender: Evidence from Turkey," Koç University-TUSIAD Economic Research Forum Working Papers 1721, Koc University-TUSIAD Economic Research Forum.
    14. Ionescu, Felicia & Simpson, Nicole, 2010. "Credit Scores and College Investment," Working Papers 2010-07, Department of Economics, Colgate University.
    15. Hui, Taylor Shek-wai, 2004. "The US/Canada Difference in Postsecondary Educational Choice," MPRA Paper 17995, University Library of Munich, Germany.
    16. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    17. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-266, May.
    18. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, and Ability: Evidence from a New Sample of Identical Twins," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 253-284.
    19. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
    20. Eckhoff Andresen, Martin & Huber, Martin, 2018. "Instrument-based estimation with binarized treatments: Issues and tests for the exclusion restriction," FSES Working Papers 492, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    21. Nobuyoshi Kikuchi, 2017. "Marginal Returns to Schooling and Education Policy Change in Japan," ISER Discussion Paper 0996r, Institute of Social and Economic Research, Osaka University, revised Oct 2017.
    22. Gensowski, Miriam, 2018. "Personality, IQ, and lifetime earnings," Labour Economics, Elsevier, vol. 51(C), pages 170-183.

    More about this item

    Keywords

    income; education; return;
    All these keywords.

    JEL classification:

    • B54 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Feminist Economics

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