College Education and Wages in the U.K.: Estimating Conditional Average Structural Functions in Nonadditive Models with Binary Endogenous Variables

CentER Discussion Paper Series No. 2009-88

36 Pages Posted: 27 Nov 2009

See all articles by Tobias J. Klein

Tobias J. Klein

Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER); IZA Institute of Labor Economics; Netspar; Tilburg Law and Economics Center (TILEC)

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Date Written: September 4, 2009

Abstract

Recent studies debate how the unobserved dependence between the monetary return to college education and selection into college can be characterized. This paper examines this question using British data. We develop a semiparametric local instrumental variables estimator for identified features of a flexible correlated random coefficient model. These identified features are directly related to the marginal and average treatment effect in policy evaluation. Our results indicate that returns to college systematically differ between actual college graduates and actual college non-graduates. They are on average higher for college graduates and positively related to selection into college for 96 percent of the individuals. The dependence between selection into college and returns to college education is strongest for individuals with low math test scores at the age of 7, individuals with less educated mothers, and for working-class individuals.

Keywords: Returns to college education, correlated random coefficient model, local instrumental variables estimation

JEL Classification: C14, C31, J31

Suggested Citation

Klein, Tobias J., College Education and Wages in the U.K.: Estimating Conditional Average Structural Functions in Nonadditive Models with Binary Endogenous Variables (September 4, 2009). CentER Discussion Paper Series No. 2009-88, Available at SSRN: https://ssrn.com/abstract=1511768 or http://dx.doi.org/10.2139/ssrn.1511768

Tobias J. Klein (Contact Author)

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

HOME PAGE: http://center.uvt.nl/staff/klein/index.html

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Tilburg Law and Economics Center (TILEC)

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