IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Analyzing Zero Returns to Education in Germany: Heterogeneous Effects and Skill Formation

  • Kamhöfer, Daniel
  • Schmitz, Hendrik

We analyze the causal effect of education on old-age cognitive abilities using German Socio-Economic Panel (SOEP) data and regional variation in mandatory years of schooling and the supply of schools. Our outcome variable is the score an individual reaches in an ultra-short intelligence test. We explain this score, using instrumented education. Instrumental variable estimation is necessary since on the one hand, schooling is highly affected by cognitive skills (reverse causality), and, on the other hand, both are influenced by third factors like income and health (possibly omitted variable bias). Using variations in education policy in the German federal states we are able to instrument education for three groups of students which cover all levels of educational achievement. Unlike previous studies this allows us to estimate three different local average treatment effects. The estimated effects range from 14% to 53% of a standard deviation. We find the strongest effect for students with intermediate education.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econstor.eu/bitstream/10419/79910/1/VfS_2013_pid_875.pdf
Download Restriction: no

Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79910.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:vfsc13:79910
Contact details of provider: Web page: http://www.socialpolitik.org/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Devereux, Paul J & Hart, Robert A, 2008. "Forced to be Rich? Returns to Compulsory Schooling in Britain," Stirling Economics Discussion Papers 2008-02, University of Stirling, Division of Economics.
  2. James J. Heckman, 2010. "Building Bridges Between Structural and Program Evaluation Approaches to Evaluating Policy," NBER Working Papers 16110, National Bureau of Economic Research, Inc.
  3. Pischke, Jörn-Steffen, 2003. "The Impact of Length of the School Year on Student Performance and Earnings: Evidence from the German Short School Years," CEPR Discussion Papers 4074, C.E.P.R. Discussion Papers.
  4. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  5. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
  6. Lechner, Michael & Miquel, Ruth & Wunsch, Conny, 2005. "Long run Effects of Public Sector Sponsored Training in West Germany," CEPR Discussion Papers 4851, C.E.P.R. Discussion Papers.
  7. Jörn-Steffen Pischke & Till von Wachter, 2006. "Zero Returns to Compulsory Schooling in Germany: Evidence and Interpretation," CEE Discussion Papers 0054, Centre for the Economics of Education, LSE.
  8. Sascha BECKER & Frank SIEBERN-THOMAS, 2001. "Returns to Education in Germany: A Variable Treatment Intensity Approach," Economics Working Papers ECO2001/09, European University Institute.
  9. Ichino, Andrea & Winter-Ebmer, Rudolf, 1998. "Lower and Upper Bounds of Returns to Schooling: An Exercise in IV estimation with Different Instruments," CEPR Discussion Papers 2007, C.E.P.R. Discussion Papers.
  10. Bingley, Paul & Martinello, Alessandro, 2013. "Mental retirement and schooling," European Economic Review, Elsevier, vol. 63(C), pages 292-298.
  11. Nils Saniter, 2012. "Estimating Heterogeneous Returns to Education in Germany via Conditional Heteroskedasticity," SOEPpapers on Multidisciplinary Panel Data Research 458, DIW Berlin, The German Socio-Economic Panel (SOEP).
  12. Torberg Falch & Sofia Sandgren, 2006. "The effect of education on cognitive ability," Working Paper Series 7306, Department of Economics, Norwegian University of Science and Technology.
  13. 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 1278-86, December.
  14. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
  15. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  16. Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
  17. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  18. Carlsson, Magnus & Dahl, Gordon B. & Rooth, Dan-Olof, 2012. "The Effect of Schooling on Cognitive Skills," IZA Discussion Papers 6913, Institute for the Study of Labor (IZA).
  19. 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.
  20. James Heckman & Edward Vytlacil, 2000. "Identifying the Role of Cognitive Ability in Explaining the Level of and Change in the Return to Schooling," NBER Working Papers 7820, National Bureau of Economic Research, Inc.
  21. Jürges, Hendrik & Reinhold, Steffen & Salm, Martin, 2011. "Does schooling affect health behavior? Evidence from the educational expansion in Western Germany," Economics of Education Review, Elsevier, vol. 30(5), pages 862-872, October.
  22. Colm Harmon & Ian Walker, 1995. "Estimates of the economic return to schooling for the United Kingdom," Open Access publications 10197/647, School of Economics, University College Dublin.
  23. Angus Deaton, 2010. "Instruments, randomization, and learning about development," Working Papers 1224, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  24. Fabrizio Mazzona & Franco Peracchi, 2010. "Ageing, cognitive abilities and retirement," EIEF Working Papers Series 1015, Einaudi Institute for Economics and Finance (EIEF), revised Jan 2012.
  25. Christian Dustmann, 2004. "Parental background, secondary school track choice, and wages," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 209-230, April.
  26. Heineck, Guido & Anger, Silke, 2010. "The Returns to Cognitive Abilities and Personality Traits in Germany," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 535-546.
  27. Philip Oreopoulos, 2006. "Estimating Average and Local Average Treatment Effects of Education when Compulsory Schooling Laws Really Matter," American Economic Review, American Economic Association, vol. 96(1), pages 152-175, March.
  28. Jorn-Steffen Pischke, 2007. "The impact of length of the school year on student performance and earnings: evidence from the German short school years," LSE Research Online Documents on Economics 6129, London School of Economics and Political Science, LSE Library.
  29. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  30. Ronny Freier & Johanna Storck, 2012. "The Treatment Effect of Attending a High-Quality School and the Influence of Unobservables," Discussion Papers of DIW Berlin 1256, DIW Berlin, German Institute for Economic Research.
  31. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  32. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc.
  33. Jorn-Steffen Pischke & Till von Wachter, 2008. "Zero returns to compulsory schooling in Germany: evidence and interpretation," LSE Research Online Documents on Economics 19509, London School of Economics and Political Science, LSE Library.
  34. Elizabeth U. Cascio & Ethan G. Lewis, 2006. "Schooling and the Armed Forces Qualifying Test: Evidence from School-Entry Laws," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
  35. Aakvik, Arild & Salvanes, Kjell G. & Vaage, Kjell, 2010. "Measuring heterogeneity in the returns to education using an education reform," European Economic Review, Elsevier, vol. 54(4), pages 483-500, May.
  36. Schneeweis, Nicole & Skirbekk, Vegard & Winter-Ebmer, Rudolf, 2012. "Does Schooling Improve Cognitive Functioning at Older Ages?," Economics Series 293, Institute for Advanced Studies.
  37. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements," SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP).
  38. Oosterbeek, Hessel & Webbink, Dinand, 2007. "Wage effects of an extra year of basic vocational education," Economics of Education Review, Elsevier, vol. 26(4), pages 408-419, August.
  39. Welch, Finis, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S65-97, October.
  40. Julien Grenet, 2013. "Is Extending Compulsory Schooling Alone Enough to Raise Earnings? Evidence from French and British Compulsory Schooling Laws," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(1), pages 176-210, 01.
  41. Richard B. Freeman, 1979. "The Effect of Demographic Factors on Age-Earnings Profiles," NBER Working Papers 0316, National Bureau of Economic Research, Inc.
  42. Budría, Santiago & Ferrer-i-Carbonell, Ada, 2012. "Income Comparisons and Non-Cognitive Skills," IZA Discussion Papers 6419, Institute for the Study of Labor (IZA).
  43. Jürgen Schupp & Sabrina Herrmann & Peter Jaensch & Frieder R. Lang, 2008. "Erfassung kognitiver Leistungspotentiale Erwachsener im Sozio-oekonomischen Panel (SOEP)," Data Documentation 32, DIW Berlin, German Institute for Economic Research.
  44. James Banks & Fabrizio Mazzonna, 2012. "The Effect of Education on Old Age Cognitive Abilities: Evidence from a Regression Discontinuity Design," Economic Journal, Royal Economic Society, vol. 122(560), pages 418-448, 05.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:79910. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.