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Rates of Return to Schooling and the Quality of Education in England and Wales

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  • David Campbell

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Abstract

Raising the quality of education has been one of the main objectives of the current government in Britain. By devoting more resources to the education sector, it is expected that pupils will achieve higher educational attainment by the time their years of compulsory schooling ends. This study attempts to assess the effect that the quality of schooling has on the subsequent labour market outcomes of a cohort of individuals who received their secondary education in the 1970s. In the first stage of the statistical analysis, an earnings equation is estimated for those in employment at age 33 which produces an estimate of the return to schooling for each local education authority (LEA) in England and Wales. It is found that the return to schooling varies across LEAs, ranging from 6% to 18%. For the second part of the analysis, these LEA-specific returns are regressed on variables capturing the mean level of school quality in each LEA. The results provide little evidence that measures of quality, such as the pupil-teacher ratio, influence the return received for each year of schooling. Some evidence is found, however, that segregating pupils according to ability is beneficial on average since the greatest returns to schooling are observed in LEAs offering selective schools.

Suggested Citation

  • David Campbell, 2001. "Rates of Return to Schooling and the Quality of Education in England and Wales," Studies in Economics 0115, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:0115
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    File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/0115.pdf
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    References listed on IDEAS

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    1. Altonji, Joseph G & Dunn, Thomas A, 1996. "Using Siblings to Estimate the Effect of School Quality on Wages," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 665-671, November.
    2. Harmon, Colm & Walker, Ian, 2000. "The Returns to the Quantity and Quality of Education: Evidence for Men in England and Wales," Economica, London School of Economics and Political Science, vol. 67(265), pages 19-35, February.
    3. Lorraine Dearden & Javier Ferri & Costas Meghir, 2002. "The Effect Of School Quality On Educational Attainment And Wages," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 1-20, February.
    4. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    5. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
    6. Lorraine Dearden, 1999. "Qualifications and earnings in Britain: how reliable are conventional OLS estimates of the returns to education?," IFS Working Papers W99/07, Institute for Fiscal Studies.
    7. Betts, Julian R, 1995. "Does School Quality Matter? Evidence from the National Longitudinal Survey of Youth," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 231-250, May.
    8. Dearden, Lorraine, 1999. "The effects of families and ability on men's education and earnings in Britain1," Labour Economics, Elsevier, vol. 6(4), pages 551-567, November.
    9. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
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    Cited by:

    1. Ammermueller, Andreas & Kuckulenz, Anja & Zwick, Thomas, 2009. "Aggregate unemployment decreases individual returns to education," Economics of Education Review, Elsevier, vol. 28(2), pages 217-226, April.

    More about this item

    Keywords

    wage level; returns to education; school quality;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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