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Education policy reform and the return to schooling from instrumental variables

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  • Kevin Denny
  • Colm Harmon

Abstract

This paper exploits an unusual policy reform that had the effect of reducing the direct cost of schooling in Ireland in the late 1960’s. This gave rise to an increased level of schooling but with effects that vary substantially across family background. This interaction of educational reform and family background generates a set of instrumental variables that are used to estimate the return to schooling allowing for the endogeneity of schooling. Using a standard Mincer type model we find a large and well-determined rate of return of around 12% which are substantially higher than the OLS estimates of around 7%.

Suggested Citation

  • Kevin Denny & Colm Harmon, 2000. "Education policy reform and the return to schooling from instrumental variables," Open Access publications 10197/653, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:oapubs:10197/653
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    File URL: http://hdl.handle.net/10197/653
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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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