A Parametric Control Function Approach to Estimating the Returns to Schooling in the Absence of Exclusion Restrictions: An Application to the NLSY

Francis Vella, Lidia Farre and Roger Klein ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We estimate the return to education using a sample drawn from the National Longitudinal Survey of Youth 1979 (NLSY79). Rather than accounting for the endogeneity of schooling through the use of instrumental variables we employ a parametric version of the Klein and Vella (2006a) estimator. This estimator bypasses the need for instruments by exploiting features of the conditional second moments of the errors. As the Klein and Vella (2006a) procedure is semi-parametric it is computationally demanding. We illustrate how to greatly reduce the required computation by parameterizing the second moments. Accounting for endogeneity increases the estimate of the return to education by 5 percentage points, from 7.6% to 12.7%.

Keywords: return to education; heteroskedasticity; endogeneity (search for similar items in EconPapers)
JEL-codes: C31 J31 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-10
New Economics Papers: this item is included in nep-ecm and nep-edu
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Citations: View citations in EconPapers (5)

Published by Ivie

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2008-16.pdf Fisrt version / Primera version, 2008 (application/pdf)

Related works:
Journal Article: A parametric control function approach to estimating the returns to schooling in the absence of exclusion restrictions: an application to the NLSY (2013)
Working Paper: A Parametric Control Function Approach to Estimating the Returns to Schooling in the Absence of Exclusion Restrictions: An Application to the NLSY (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2008-16

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