The causal effect of education on earnings
Chapter 30 in Handbook of Labor Economics, 1999, vol. 3, Part A, pp 1801-1863 from Elsevier
This paper surveys the recent literature on the causal relationship between education and earnings. I focus on four areas of work: theoretical and econometric advances in modelling the causal effect of education in the presence of heterogeneous returns to schooling; recent studies that use institutional aspects of the education system to form instrumental variables estimates of the return to schooling; recent studies of the earnings and schooling of twins; and recent attempts to explicitly model sources of heterogeneity in the returns to education. Consistent with earlier surveys of the literature, I conclude that the average (or average marginal) return to education is not much below the estimate that emerges from a standard human capital earnings function fit by OLS. Evidence from the latest studies of identical twins suggests a small upward "ability" bias -- on the order of 10%. A consistent finding among studies using instrumental variables based on institutional changes in the education system is that the estimated returns to schooling are 20-40% above the corresponding OLS estimates. Part of the explanation for this finding may be that marginal returns to schooling for certain subgroups -- particularly relatively disadvantaged groups with low education outcomes -- are higher than the average marginal returns to education in the population as a whole.
JEL-codes: J0 (search for similar items in EconPapers)
References: Add references at CitEc
Citations View citations in EconPapers (760) Track citations by RSS feed
Downloads: (external link)
http://www.sciencedirect.com/science/article/B7P5V ... 668bdad516a770b46020
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:labchp:3-30
Access Statistics for this chapter
More chapters in Handbook of Labor Economics from Elsevier
Series data maintained by Dana Niculescu ().