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Education Policy Reform and the Return to Schooling from Instrumental Variables

  • Kevin J Denny

    (University College Dublin)

  • Colm P Harmon

    (University College Dublin)

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%.

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File URL: http://www.ucd.ie/economics/research/papers/2000/WP00.12.pdf
File Function: First version, 2000
Download Restriction: no

Paper provided by School of Economics, University College Dublin in its series Working Papers with number 200012.

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Length: 15 pages
Date of creation: 10 Jun 2000
Date of revision:
Handle: RePEc:ucn:wpaper:200012
Contact details of provider: Postal: UCD, Belfield, Dublin 4
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Web page: http://www.ucd.ie/economics

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  1. Tussing, A. Dale, 1978. "Irish Educational Expenditures - Past, Present, and Future," Research Series, Economic and Social Research Institute (ESRI), number GRS92.
  2. Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
  3. Jeffrey R. Kling, 2000. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," NBER Working Papers 7989, National Bureau of Economic Research, Inc.
  4. Kevin Denny & Colm Harmon & Dorren McMahon & Sandra Redmond, 1999. "Literacy and Education in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 30(3), pages 215-226.
  5. Angrist, J.D. & Imbens, G.W., 1992. "Average causal response with variable treatment intensity," Discussion Paper 1992-34, Tilburg University, Center for Economic Research.
  6. Callan, T. & Harmon, C.P., 1997. "The Economic Return to Schooling in Ireland," Papers 97/23, College Dublin, Department of Political Economy-.
  7. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, March.
  8. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  9. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  10. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  11. Kevin Denny & Colm Harmon & Dorren McMahon & Sandra Redmond, 1999. "Literacy and education in Ireland," Open Access publications 10197/154, School of Economics, University College Dublin.
  12. 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..
  13. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 1999. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," Working Papers 804, Princeton University, Department of Economics, Industrial Relations Section..
  14. Meghir, Costas & Palme, Mårten, 1999. "Assessing the Effect of Schooling on Earnings Using a Social Experiment," SSE/EFI Working Paper Series in Economics and Finance 313, Stockholm School of Economics.
  15. Callan, Tim & Wren, Anne, 1994. "Male-Female Wage Differentials: Analysis and Policy Issues," Research Series, Economic and Social Research Institute (ESRI), number GRS163.
  16. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  17. Uusitalo, R. & Conneely, K., 1998. "Estimating Heterogeneous Treatment Effects in the Becker Schooling Model," University of Helsinki, Department of Economics 435, Department of Economics.
  18. Kevin Denny & Colm Harmon & Sandra Redmond, 2000. "Functional literacy, educational attainment and earnings - evidence from the international adult literacy survey," IFS Working Papers W00/09, Institute for Fiscal Studies.
  19. Kakwani, Nanak, 1980. "On a Class of Poverty Measures," Econometrica, Econometric Society, vol. 48(2), pages 437-46, March.
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