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Analyzing Zero Returns to Education in Germany – Heterogeneous Eff ects and Skill Formation

  • Daniel A. Kamhöfer

    ()

  • Hendrik Schmitz

We analyze the effect of education on wages using German Socio-Economic Panel data and regional variation in mandatory years of schooling and the supply of schools. This allows us to estimate more than one local average treatment effect and heterogeneous effects for different groups of compliers. Our results are in line with previous studies that do not find an effect of compulsory schooling on wages in Germany. We go beyond these studies and test a potential reason for it, namely that basic skills are learned earlier in Germany and additional years of schooling are not effective anymore. This is done by also estimating the effect of education on cognitive skills. The results suggest that education after the eighth year does not seem to have a causal effect on cognitive skills in Germany. This is consistent with the explanation for zero effects of schooling on earnings.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0446.

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Length: 24 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:rwi:repape:0446
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  17. James J. Heckman, 2010. "Building Bridges Between Structural and Program Evaluation Approaches to Evaluating Policy," NBER Working Papers 16110, National Bureau of Economic Research, Inc.
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  24. Jürges, Hendrik & Reinhold, Steffen & Salm, Martin, 2009. "Does Schooling Affect Health Behavior? Evidence from the Educational Expansion in Western Germany," IZA Discussion Papers 4330, Institute for the Study of Labor (IZA).
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  26. Andrea Ichino & Rudolf Winter-Ebmer, 2004. "The Long-Run Educational Cost of World War II," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 57-86, January.
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