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Returns to Schooling in Spain. How Reliable Are IV Estimates?


  • Empar Pons

    () (Universidad de Valencia)

  • Maria Teresa Gonzalo

    (Universidad de Valencia)


This paper studies the Ordinary Least-Squared (OLS) and Instrumental Variables (IV) estimates of the returns to schooling for male workers in Spain. OLS estimates are often biased due to the endogeneity of schooling, measurement errors or omitted variables. Proper IV estimates correct this bias. The reliability of family background, natural experiments (based on changes in the education system and season of birth) and the availability of a college in the province is checked using Spanish data. The results suggest that background and college availability are valid instruments and that the IV estimates of the returns to schooling are higher than OLS estimates. These results are in line with the majority of previous results in the literature.

Suggested Citation

  • Empar Pons & Maria Teresa Gonzalo, 2001. "Returns to Schooling in Spain. How Reliable Are IV Estimates?," Working Papers 446, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp446

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    References listed on IDEAS

    1. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
    2. Kevin Denny & Colm Harmon, 2000. "Education policy reform and the return to schooling from instrumental variables," Working Papers 200012, School of Economics, University College Dublin.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    4. Callan, Tim & Harmon, Colm, 1999. "The economic return to schooling in Ireland," Labour Economics, Elsevier, vol. 6(4), pages 543-550, November.
    5. Vieira, Jose A. C., 1999. "Returns to education in Portugal," Labour Economics, Elsevier, vol. 6(4), pages 535-541, November.
    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. Cecilia Albert Verdú, 1998. "- Higher Education Demand In Spain: The Influence Of Labour Market Signals And Family Background," Working Papers. Serie EC 1998-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    8. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    9. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    10. Costas Meghir & Mårten Palme, 1999. "Assessing the effect of schooling on earnings using a social experiment," IFS Working Papers W99/10, Institute for Fiscal Studies.
    11. repec:fth:prinin:317 is not listed on IDEAS
    12. Angel López-Nicolás & Jaume García & Pedro J. Hernández, 2001. "How wide is the gap? An investigation of gender wage differences using quantile regression," Empirical Economics, Springer, vol. 26(1), pages 149-167.
    13. Harmon, Harmon & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
    14. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
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    Cited by:

    1. Zamarro, Gema, 2010. "Accounting for heterogeneous returns in sequential schooling decisions," Journal of Econometrics, Elsevier, vol. 156(2), pages 260-276, June.
    2. Ismail, Ramlee, 2007. "The Impact of Schooling Reform on Returns to Education in Malaysia," MPRA Paper 15021, University Library of Munich, Germany, revised 29 Jan 2008.
    3. Letícia Xander Russo & Joilson Dias, 2016. "The Health Influence On Returns To Education In Brazil: A Nonlinear Approach," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42ndd Brazilian Economics Meeting] 200, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    4. Manuel Alejandro HIDALGO PEREZ, "undated". "Analysis of Education Wage Premium in Spain," Regional and Urban Modeling 284100020, EcoMod.

    More about this item


    Returns to schooling; Instrumental Variables; Spanish schooling system;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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