Full Citation

Title: Ability Bias and the Return to Schooling: an Iv Approach With Birth Cohorts

Citation Type: Miscellaneous

Publication Year: 2006

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: The traditional estimates of the return to schooling are known to potentially suffer from ability bias. This paper attempts to eliminate ability bias and measure the true return to schooling. A fall in the cost of education raises the schooling choices of workers in a more recent cohort, but does not alter their average predetermined ability. Such changes would generate variation in the relative earnings of cohorts only if education is productivity enhancing. Based on this observation, education is instrumented with cohort dummies to capture the cost and benefit environment at the time a person makes his schooling decision. Identification requires that the average ability of a cohort does not systematically vary with the average education of that cohort. Using data from the CPS March Supplement for the years 1964-2003 and the Decennial Census Surveys 1960 - 2000, wage regressions are estimated instrumenting education with birth cohorts and state-birth cohorts. The results suggest that the true return is significantly lower than the OLS return.

User Submitted?: No

Authors: Kaymak, Baris

Publisher: University of Rochester

Data Collections: IPUMS CPS

Topics: Education, Labor Force and Occupational Structure

Countries: