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Instrument Choice and the Returns to Education: New Evidence from Vietnam

Jean-Louis Arcand (), Béatrice d'Hombres () and Paul Gyselinck
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Paul Gyselinck: CERDI-CNRS, University of Auvergne

Labor and Demography from EconWPA

Abstract: This paper focuses on instrument choice while consistently estimating the returns to education in Vietnam. Using data culled from the 2 rounds of the Vietnam Living Standards Survey (VLSS), we explore different sets of exogenous instruments that rely on demand and supply side sources of variation in schooling as well as the matrix of instruments proposed by Hausman and Taylor (1981). Instrument validity tests suggest that many variables do not satisfy the necessary conditions allowing them to be used as instruments. As in several studies, we find that IV estimates of the returns to education are substantially higher than the corresponding OLS estimate. We show how the Hausman-Taylor matrix of instruments, when combined with other instruments, may be a useful way of consistently estimating an average return to education rather than a local average treatment effect (Angrist, 1994).

Keywords: ate of return; instrumental variables procedures; Instrument choice; Hausman-Taylor estimator; Hahn-Hausman test; Vietnam (search for similar items in EconPapers)
JEL-codes: J31 I21 C30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu, nep-sea, nep-tra and nep-ure
Date: 2005-10-11
Note: Type of Document - pdf; pages: 22
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