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Returns to education in West Germany: an empirical assessment

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  • Lauer, Charlotte
  • Steiner, Viktor

Abstract

This paper analyses the developments in the returns to education in West Germany for the period from 1984 to 1997. Based on simple Mincer-type wage equations, we estimate a return of about 8% for men and 10% for women, and these returns have remained remarkably stable over the period. On the basis of more differentiated specifications of wage equations, we find evidence for the presence of cohort effects, in addition to time and lifecycle effects. Furthermore, the analysis shows that the choice of the sample of observation plays a crucial role. Indeed, huge differences exist between part-timers and full-timers, as well as between private and public sectors. Full-time working women have similar returns to schooling than men, and if female returns are declining and have become lower than male returns in the private sector, they are rather increasing and are higher than male ones in the public sector. Moreover, not all education degrees yield the same annual return. If one accounts for the different lengths of studies, the master craftsman degree yields the highest return. However, the estimates proved rather robust towards the specification of the wage equation and the estimation method.

Suggested Citation

  • Lauer, Charlotte & Steiner, Viktor, 2000. "Returns to education in West Germany: an empirical assessment," ZEW Discussion Papers 00-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5280
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    1. 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.
    2. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
    3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    4. Knut Gerlach, 1987. "A Note on Male-Female Wage Differences in West Germany," Journal of Human Resources, University of Wisconsin Press, vol. 22(4), pages 584-592.
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    Cited by:

    1. Riphahn Regina T., 2005. "Are there Diverging Time Trends in the Educational Attainment of Nationals and Second Generation Immigrants? / Unterscheiden sich die Trends in der Entwicklung des Bildungserfolges von Einheimischen u," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(3), pages 325-346, June.
    2. Puhani, Patrick A., 2001. "Wage Rigidities in Western Germany? Microeconometric Evidence from the 1990s," IZA Discussion Papers 334, Institute for the Study of Labor (IZA).
    3. Plünnecke, Axel, 2004. "Akademisches Humankapital in Deutschland: Potenziale und Handlungsbedarf," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft Köln (IW) / Cologne Institute for Economic Research, vol. 31(2), pages 49-58.
    4. Flossmann Anton L. & Pohlmeier Winfried, 2006. "Causal Returns to Education: A Survey on Empirical Evidence for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(1), pages 6-23, February.
    5. Jana Kremer, 2001. "Labor Unions, Unemployment, and Inequality in an OLG-Model with Heterogeneous Agents," Discussion Paper Series 207, Universitaet Augsburg, Institute for Economics.
    6. Timmermann, Dieter, 2010. "Alternativen der Hochschulfinanzierung," Arbeitspapiere 211, Hans-Böckler-Stiftung, Düsseldorf.
    7. Ludger Wößmann, 2008. "Efficiency and equity of European education and training policies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(2), pages 199-230, April.
    8. B. Müge Tunaer & Yaprak Gülcan, 2006. "Measuring Returns to Education in Turkey," Papers of the Annual IUE-SUNY Cortland Conference in Economics,in: Proceedings of the Conference on Human and Economic Resources, pages 66-71 Izmir University of Economics.
    9. Lange, Simon & von Werder, Marten, 2016. "Tracking and the Intergenerational Transmission of Education: Evidence from a Natural Experiment," Annual Conference 2016 (Augsburg): Demographic Change 145784, Verein für Socialpolitik / German Economic Association.
    10. Michael Voigtländer, 2005. "Qualitative und quantitative Aspekte einer Elternrente?," List Forum Chapter,in: List Forum Band 31, edition 1, volume 3, chapter 13, pages 215-230 List Gesellschaft e.V..
    11. Glocker, Daniela & Storck, Johanna, 2014. "Risks and returns to educational fields – A financial asset approach to vocational and academic education," Economics of Education Review, Elsevier, vol. 42(C), pages 109-129.
    12. Bernhard Boockmann & Viktor Steiner, 2006. "Cohort effects and the returns to education in West Germany," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1135-1152.
    13. Riphahn, Regina, 2001. "Dissimilation? The Educational Attainment of Second Generation Immigrants," CEPR Discussion Papers 2903, C.E.P.R. Discussion Papers.
    14. Schnabel, Reinhold & Schnabel, Isabel, 2002. "Family and gender still matter: the heterogeneity of returns to education in Germany," ZEW Discussion Papers 02-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    15. Lauer, Charlotte, 2000. "Gender wage gap in West Germany: how far do gender differences in human capital matter?," ZEW Discussion Papers 00-07, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    16. Simon Lange & Marten von Werder, 2014. "The Effects of Delayed Tracking: Evidence from German States," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 163, Courant Research Centre PEG.
    17. John Ermisch & Marco Francesconi & Thomas Siedler, 2004. "Intergenerational Economic Mobility and Assortative Mating," Discussion Papers of DIW Berlin 448, DIW Berlin, German Institute for Economic Research.
    18. Ammermüller, Andreas & Weber, Andrea Maria, 2005. "Educational Attainment and Returns to Education in Germany: An Analysis by Subject of Degree, Gender and Region," ZEW Discussion Papers 05-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    19. Ammermüller, Andreas & Weber, Andrea M. & Westerheide, Peter, 2005. "Die Entwicklung und Verteilung des Vermögens privater Haushalte unter besonderer Berücksichtigung des Produktivvermögens (Aktenzeichen 534 - 52061 -17): Abschlussbericht zum Forschungsauftrag des Bund," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 111442, May.
    20. Regina T. Riphahn, 2002. "Bruttoeinkommensverteilung in Deutschland 1984 - 1999 und Ungleichheit unter ausländischen Erwerbstätigen," Discussion Papers of DIW Berlin 272, DIW Berlin, German Institute for Economic Research.

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