Persistence Bias and Schooling Returns
Corrado Andini ()
No 8143, IZA Discussion Papers from Institute for the Study of Labor (IZA)
A well-established empirical literature suggests that individual wages are persistent. Several theoretical arguments support this empirical finding. Yet, the standard approach to the estimation of schooling returns does not account for this fact. This paper investigates the consequences of disregarding earnings persistence. In particular, it shows that the most commonly used static-model estimators of schooling coefficients are subject to an omitted-variable bias which can be named "persistence bias".
Keywords: schooling; wages; dynamic panel-data models (search for similar items in EconPapers)
JEL-codes: C23 I21 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-lab
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