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Estimating the Return to College in Britain Using Regression and Propensity Score Matching

  • Wen Fan

    (University College Dublin)

Registered author(s):

    College graduates tend to earn more than non-graduates but it is difficult to ascertain how much of this empirical association between wages and college degree is due to the causal effect of a college degree and how much is due to unobserved factors that influence both wages and education (e.g. ability). In this paper, I use the 1970 British Cohort Study to examine the college premium for people who have a similar ability level by using a restricted sample of people who are all college eligible but some never attend. Compared to using the full sample, restricting the sample to college-eligible reduces the return to college significantly using both regression and propensity score matching (PSM) estimates. The finding suggests the importance of comparing individuals of similar ability levels when estimating the return to college.

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    File URL: http://www.ucd.ie/t4cms/WP11_19.pdf
    File Function: First version, 2011
    Download Restriction: no

    Paper provided by School of Economics, University College Dublin in its series Working Papers with number 201119.

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    Length: 34 pages
    Date of creation: 30 Sep 2011
    Date of revision:
    Handle: RePEc:ucn:wpaper:201119
    Contact details of provider: Postal: UCD, Belfield, Dublin 4
    Phone: +353-1-7067777
    Fax: +353-1-283 0068
    Web page: http://www.ucd.ie/economics

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    1. Sloane, Peter J. & O'Leary, Nigel C., 2004. "The Return to a University Education in Great Britain," IZA Discussion Papers 1199, Institute for the Study of Labor (IZA).
    2. Devereux, Paul J. & Fan, Wen, 2011. "Earnings returns to the British education expansion," Economics of Education Review, Elsevier, vol. 30(6), pages 1153-1166.
    3. Vincenzo Caponi & Miana Plesca, 2009. "Post-secondary education in Canada: can ability bias explain the earnings gap between college and university graduates?," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 1100-1131, August.
    4. Alberto Abadie & Guido W. Imbens, 2008. "On the Failure of the Bootstrap for Matching Estimators," Econometrica, Econometric Society, vol. 76(6), pages 1537-1557, November.
    5. Lorraine Dearden, 1998. "Ability, families, education and earnings in Britain," IFS Working Papers W98/14, Institute for Fiscal Studies.
    6. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2002. "Does education raise productivity, or just reflect it?," Working Papers 10197/1104, School of Economics, University College Dublin.
    7. Hansen, Karsten T. & Heckman, James J. & Mullen, Kathleen, 2003. "The Effect of Schooling and Ability on Achievement Test Scores," IZA Discussion Papers 826, Institute for the Study of Labor (IZA).
    8. 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 251-66, May.
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