Quality-Consistent Estimates of International Returns to Skill

Eric Hanushek and Lei Zhang
Authors registered in the RePEc Author Service: Lei Zhang () and Lei Zhang

No 12664, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Returns to education are traditionally estimated in a Mincer wage equation from the variation in schooling for a cross-section of individuals of different ages. Because individuals receive education at different time periods, when the quality of their education may not be identical, this method leads to an over- or under-estimation of the return to education of a given quality depending on how education quality evolves over time. This quality issue interacts with ability bias from self-selection into schooling and is particularly problematic when comparing returns across different countries. Using microdata from the International Adult Literacy Survey, we construct quality adjusted measures of schooling attained at different time periods and use these along with international literacy test information to estimate returns to skills for 13 countries. Estimated returns to quality-adjusted education are considerably higher than the traditional estimate for most countries, but these are offset to varying degrees by selection biases on ability. The combined corrections alter significantly the pattern of returns to schooling and skill seen from naive Mincer wage equations.

JEL-codes: I2 J2 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-edu, nep-hrm and nep-lab
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Citations: View citations in EconPapers (76)

Published as Hanushek, Eric and Lei Zhang. “Quality-consistent estimates of international schooling and skill gradients." Journal of Human Capital 3, 2 (2009): 107-143.

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