Nonlinearity in the Return to Education
Philip A. Trostel
University of Maine - Economics
Universidad del CEMA
Universidad del CEMA - Department of Economics
Journal of Applied Economics, Vol. 8, No. 1, pp. 191-202, May 2005
This study estimates marginal rates of return to investment in schooling in 12 countries. Significant systematic nonlinearity in the marginal rate of return is found. In particular, the marginal rate of return is increasing significantly at low levels of education, and decreasing significantly at high levels of education. This may help explain why estimates of the return to schooling are often considerably higher when instrumenting for education.
Keywords: Return to education, nonlinearity, instrumental variables
JEL Classification: I20, J24Accepted Paper Series
Date posted: August 31, 2005
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