Interpreting Degree Effects in the Returns to Education

Alfonso Flores-Lagunes () and Audrey Light ()

No 4169, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Researchers often identify degree effects by including degree attainment (D) and years of schooling (S) in a wage model, yet the source of independent variation in these measures is not well understood. We argue that S is negatively correlated with ability among degree-holders because the most able graduate the fastest, while a positive correlation exists among dropouts because the most able benefit from increased schooling. Using data from the NLSY79, we find support for this explanation, and we reject the notion that the independent variation in S and D reflects reporting error.

Keywords: returns to education; degree effects (search for similar items in EconPapers)
JEL-codes: I21 J24 J31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2009-05
New Economics Papers: this item is included in nep-edu and nep-lab
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Published - published in: Journal of Human Resources, 2010, 45 (2), 439-467

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Journal Article: Interpreting Degree Effects in the Returns to Education (2010)
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