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

Author

Listed:
  • 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)

Abstract

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).

Suggested Citation

  • Jean-Louis Arcand & Béatrice d'Hombres & Paul Gyselinck, 2005. "Instrument Choice and the Returns to Education: New Evidence from Vietnam," Labor and Demography 0510011, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpla:0510011
    Note: Type of Document - pdf; pages: 22
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    3. Daeheon Choi & Chune Young Chung & Ha Truong, 2019. "Return on Education in Two Major Vietnamese Cities," Sustainability, MDPI, Open Access Journal, vol. 11(18), pages 1-30, September.

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    More about this item

    Keywords

    ate of return; instrumental variables procedures; Instrument choice; Hausman-Taylor estimator; Hahn-Hausman test; Vietnam;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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