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Estimating Heterogeneous Returns to Education in Germany via Conditional Second Moments

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  • Saniter, Nils

Abstract

In this paper I investigate the causal returns to education for different educational groups in Germany. I circumvent potential drawbacks of IV by employing a new method by Klein and Vella (2010). In this approach identification is not based on instruments but on the presence of heteroskedasticity. Using data from the German Socio-Economic Panel Study (SOEP) I find that the causal return to education is 8.5% for the entire sample, 2% for graduates from the basic school track and 11% for graduates from a higher school track. Across these groups the endogeneity bias in simple OLS regressions varies significantly. This confirms recent evidence in the literature on Germany. Various robustness checks support my findings.

Suggested Citation

  • Saniter, Nils, 2012. "Estimating Heterogeneous Returns to Education in Germany via Conditional Second Moments," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62050, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc12:62050
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    References listed on IDEAS

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    1. Jörn-Steffen Pischke & Till von Wachter, 2008. "Zero Returns to Compulsory Schooling in Germany: Evidence and Interpretation," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 592-598, August.
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    5. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters,in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    6. Thomas J. Kane & Cecilia Elena Rouse & Douglas Staiger, 1999. "Estimating Returns to Schooling When Schooling is Misreported," NBER Working Papers 7235, National Bureau of Economic Research, Inc.
    7. Andrea Ichino & Rudolf Winter-Ebmer, 2004. "The Long-Run Educational Cost of World War II," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 57-86, January.
    8. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-1286, December.
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    13. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
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    15. Thomas Siedler, 2010. "Schooling and Citizenship in a Young Democracy: Evidence from Postwar Germany," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 315-338, June.
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    Cited by:

    1. Balestra, Simone & Backes-Gellner, Uschi, 2017. "Heterogeneous returns to education over the wage distribution: Who profits the most?," Labour Economics, Elsevier, vol. 44(C), pages 89-105.
    2. Saniter, Nils & Siedler, Thomas, 2014. "Door Opener or Waste of Time? The Effects of Student Internships on Labor Market Outcomes," IZA Discussion Papers 8141, Institute for the Study of Labor (IZA).
    3. Postepska, Agnieszka, 2017. "Ethnic Capital and Intergenerational Transmission of Educational Attainment," IZA Discussion Papers 10851, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

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

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