Estimating Marginal Returns to Education

34 Pages Posted: 19 Oct 2010 Last revised: 20 Oct 2010

See all articles by Pedro Manuel Carneiro

Pedro Manuel Carneiro

University College London - Department of Economics; IZA Institute of Labor Economics

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Edward Vytlacil

Yale University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2010

Abstract

This paper estimates the marginal returns to college for individuals induced to enroll in college by different marginal policy changes. The recent instrumental variables literature seeks to estimate this parameter, but in general it does so only under strong assumptions that are tested and found wanting. We show how to utilize economic theory and local instrumental variables estimators to estimate the effect of marginal policy changes. Our empirical analysis shows that returns are higher for individuals with values of unobservables that make them more likely to attend college. We contrast the returns to well-defined marginal policy changes with IV estimates of the return to schooling. Some marginal policy changes inducing students into college produce very low returns.

Suggested Citation

Carneiro, Pedro Manuel and Heckman, James J. and Vytlacil, Edward J., Estimating Marginal Returns to Education (October 2010). NBER Working Paper No. w16474. Available at SSRN: https://ssrn.com/abstract=1694334

Pedro Manuel Carneiro (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

IZA Institute of Labor Economics

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Germany

James J. Heckman

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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American Bar Foundation

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Institute for the Study of Labor (IZA)

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Germany

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

Edward J. Vytlacil

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8281
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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