Heterogeneity in Schooling Rates of Return

52 Pages Posted: 25 Apr 2011

See all articles by Daniel J. Henderson

Daniel J. Henderson

University of Alabama; Institute for the Study of Labor (IZA); Xiamen University - Wang Yanan Institute for Studies in Economics (WISE)

Solomon W. Polachek

State University of New York at Binghamton; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Le Wang

University of New Hampshire

Abstract

This paper relaxes the assumption of homogeneous rates of return to schooling by employing nonparametric kernel regression. This approach allows us to examine the differences in rates of return to education both across and within groups. Similar to previous studies we find that on average blacks have higher returns to education than whites, natives have higher returns than immigrants and younger workers have higher returns than older workers. Contrary to previous studies we find that the average gap of the rate of return between white and black workers is larger than previously thought and the gap is smaller between immigrants and natives. We also uncover significant heterogeneity, the extent of which differs both across and within groups. The estimated densities of returns vary across groups and time periods and are often skewed. For example, during the period 1950-1990, at least 5% of whites have negative returns. Finally, we uncover the characteristics common amongst those with the smallest and largest returns to education. For example, we find that immigrants, aged 50-59, are most likely to have rates of return in the bottom 5% of the population.

Keywords: Mincer regressions, nonparametric, rate of return to education

JEL Classification: C14, J24

Suggested Citation

Henderson, Daniel J. and Polachek, Solomon W. and Wang, Le, Heterogeneity in Schooling Rates of Return. IZA Discussion Paper No. 5662, Available at SSRN: https://ssrn.com/abstract=1820953

Daniel J. Henderson (Contact Author)

University of Alabama ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-8991 (Phone)

HOME PAGE: http://cba.ua.edu/~djhender

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/index_html?lang=en&mainframe=http%3A//www.iza.org/en/webcontent/personnel/photos/

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE)

A 307, Economics Building
Xiamen, Fujian 10246
China

Solomon W. Polachek

State University of New York at Binghamton ( email )

Binghamton, NY 13902-6000
United States
607-777-2144 (Phone)
607-777-4900 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Le Wang

University of New Hampshire ( email )

15 College Road
Durham, NH 03824
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
37
Abstract Views
427
PlumX Metrics