Using heteroscedasticity to estimate the returns to education

Arbeitspapier

We apply a new estimator to the measurement of the economic returns to education. We control for endogenous education, unobserved ability and measurement error using only the natural heteroscedasticty of wages and education attainment. Our prefered estimate, 6.07%, is closer to the OLS estimate but smaller (and more precise) than the estimates typically reported by studies that use IV. Our results indicate that the biases generated by unobserved ability and measurement error tend to cancel each other out as suggested by Griliches (1977). We also present Monte Carlo evidence to show that the finite sample bias our estimator is small.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Centre for Economic Research Working Paper Series ; No. WP03/01

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models; Multiple Variables: General ; Education and Research Institutions: General ; Wage Level and Structure; Wage Differentials
• Subject: Identification ; Returns to Education ; Bildungsertrag ; Messung ; Theorie ; Großbritannien ; Heteroskedastizität

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hogan, Vincent ; Rigobon, Roberto
• Event: Veröffentlichung
• (who): University College Dublin, Department of Economics
• (where): Dublin
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/72446