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Instrument Choice and the Returns to Education: New Evidence from Vietnam

  • Jean-Louis Arcand

    (CERDI-CNRS, University of Auvergne & European Development Network)

  • Béatrice d'Hombres

    (CERDI-CNRS, University of Auvergne & University of Padua)

  • Paul Gyselinck

    (CERDI-CNRS, University of Auvergne)

This paper focuses on instrument choice while consistently estimating the returns to education in Vietnam. Using data culled from the 2 rounds of the Vietnam Living Standards Survey (VLSS), we explore different sets of exogenous instruments that rely on demand and supply side sources of variation in schooling as well as the matrix of instruments proposed by Hausman and Taylor (1981). Instrument validity tests suggest that many variables do not satisfy the necessary conditions allowing them to be used as instruments. As in several studies, we find that IV estimates of the returns to education are substantially higher than the corresponding OLS estimate. We show how the Hausman-Taylor matrix of instruments, when combined with other instruments, may be a useful way of consistently estimating an average return to education rather than a local average treatment effect (Angrist, 1994).

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Paper provided by EconWPA in its series Labor and Demography with number 0510011.

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Length: 22 pages
Date of creation: 11 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0510011
Note: Type of Document - pdf; pages: 22
Contact details of provider: Web page: http://econwpa.repec.org

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  26. van de Walle, Dominique, 2000. "Are returns to investment lower for the poor? Human and physical capital interactions in rural Viet Nam," Policy Research Working Paper Series 2425, The World Bank.
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