How Important Are Fixed Effects and Time Trends in Estimating Returns to Schooling? Evidence from a Replication of Jacobson, Lalonde and Sullivan, 2005

Susan Dynarski, Brian A. Jacob () and Daniel Kreisman
Additional contact information
Brian A. Jacob: University of Michigan

No 11935, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A substantial and rapidly growing literature has developed around estimating earnings gains from two-year college degrees using administrative data. These papers almost universally employ a person-level fixed effects strategy to estimate earnings premia net of fixed attributes. We note that the seminal piece on which these papers build, Jacobson, Lalonde and Sullivan (Journal of Econometrics, 2005), provides theoretical and empirical evidence for the importance of additionally differencing out individual time-trends. The subsequent literature has not followed suit. Through replication we ask whether this matters. We show that it does, and further that these person-level time-trends need not be computationally burdensome in large administrative data. We recommend them as a unifying econometric standard for future work.

Keywords: fixed effects; community college; wages (search for similar items in EconPapers)
JEL-codes: C51 C52 C54 C55 I26 J31 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2018-11
New Economics Papers: this item is included in nep-eff and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: How important are fixed effects and time trends in estimating returns to schooling? Evidence from a replication of Jacobson, Lalonde, and Sullivan, 2005 (2018)
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