return to education

Author
Abstract

Although schooling and earnings are highly correlated, social
scientists have argued for decades over the causal effect of education. A
convincing analysis of the causal link between education and earnings
requires an exogenous source of variation in education outcomes. This
paper explores the use of college proximity as an exogenous determinant of
schooling. An examination of the NLS Young Men Cohort reveals that men who
grew up in local labor markets with a nearby college have significantly
higher education and significantly higher earnings than other men. The
education and earnings gains are concentrated among men with poorly-
educated parents -- men who would otherwise stop schooling at relatively
low levels. When college proximity is taken as an exogenous determinant of
schooling the implied instrumental variables estimates of the return to
schooling are 25-60% higher than conventional ordinary least squares
estimates.
Since the effect of a nearby college on schooling attainment varies by
family background it is possible to test whether college proximity is a
legitimately exogenous determinant of schooling. The results affirm that
marginal returns to education among children of less-educated parents are
as high and perhaps much higher than the rates of return estimated by
conventional methods.

Year of Publication
1993
Number
317
Date Published
07/1993
Publication Language
eng
Citation Key
In L.N. Christofides, E.K. Grant, and R. Swidinsky, (eds.), Aspects of Labor Market Behavior: Essays in Honour of John Vandercamp. Toronto: University of Toronto Press, 1995
Card, D. (1993). Using Geographic Variation in College Proximity to Estimate the Return to Schooling. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01fb494842g (Original work published July 1993)
Working Papers
Author
Abstract

This paper develops and applies a new semi-parametric correction for sample-selection in the
context of a multi-market Roy model of mobility and earnings. Instead of workers choosing occupations
as in Roy's paper, this paper formulates a model where individuals choose which of the 50 states in the
U.S. (plus the District of Columbia) to live and work in. The new econometric methodology combines
Lee's (1982) parametric "maximum order statistic" approach to multi-choice selection models with Ahn
and Powell’s (1993) more recent work on "single-index" models. The resulting correction requires no
assumptions on the joint distribution of the error terms in the outcome and multiple selection equations
and can easily be adapted to a variety of other polychotomous choice problems. The empirical work,
which uses Census data for I980 and 1990, confirms the role of comparative advantage in mobility
decisions. The results suggest that self-selection of higher educated people to states with higher returns
to education generally leads to downward biases in the returns to education in state-specific labor
markets. I also find that state-to-state migration flows respond strongly to differences in the return to
education and amenities across states.

Year of Publication
1997
Number
381
Date Published
05/1997
Publication Language
eng
Citation Key
Econometrica , Vol. 70, No. 6, November, 2002
Dahl, G. (1997). Mobility and the Returns to Education: Testing A Roy Model With Multiple Markets. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01tt44pm85v (Original work published May 1997)
Working Papers
Abstract

This paper uses a new survey to contrast the wages of genetically
identical twins with different schooling levels. Multiple measurements of
schooling levels were also collected to assess the effect of reporting
error on the estimated economic returns to schooling. The data indicate
that omitted ability variables do not bias the estimated return to
schooling upward, but that measurement error does bias it downward.
Adjustment for measurement error indicates that an additional year of
schooling increases wages by 12-l6t, a higher estimate of the economic
returns to schooling than has been previously found.

Year of Publication
1992
Number
304
Date Published
07/1992
Publication Language
eng
Citation Key
American Economic Review, Vol. 84, No. 5, December, 1994
Ashenfelter, O., & Krueger, A. (1992). Estimates of the Economic Return to Schooling from a New Sample of Twins. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01hd76s007p (Original work published July 1992)
Working Papers