Causal Returns to Education

Harry Patrinos and George Psacharopoulos
Additional contact information
George Psacharopoulos: Georgetown University

No 18077, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using 182 estimates from 140 studies in 55 countries, this paper compares ordinary least squares (OLS) and instrumental variables (IV) estimates of the private returns to schooling. IV returns average 9.7 percent—38 percent higher than OLS—and exceed OLS in nearly 80 percent of cases, with the largest gaps in developing countries. These patterns align with theories of diminishing marginal returns, scarcity rents, and attenuation from measurement error. While IV methods mitigate bias, instrument validity and external validity concerns persist. Evidence consistently shows substantial causal returns, particularly for disadvantaged populations, underscoring the need for rigorous research.

Keywords: endogeneity; returns to education; human capital (search for similar items in EconPapers)
JEL-codes: I26 J24 (search for similar items in EconPapers)
Date: 2025-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://docs.iza.org/dp18077.pdf (application/pdf)

Related works:
Working Paper: Causal Returns to Education (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp18077

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().