Causal Returns to Schooling and Individual Heterogeneity

24 Pages Posted: 16 Jun 2012

See all articles by Friedhelm Pfeiffer

Friedhelm Pfeiffer

Centre for European Economic Research (ZEW); University of Mannheim - Department of Economics; IZA Institute of Labor Economics

Winfried Pohlmeier

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE)

Abstract

In this paper, human capital investments are evaluated by assuming heterogeneous returns to schooling. We use the potential outcome approach to measure the causal effect of human capital investments on earnings as a continuous treatment effect. Empirical evidence is based on a sample of West German full-time employed males (BIBB/IAB survey on educational and vocational attainment and career 1998/99). Our estimate of the average partial effect (APE) of an additional year of schooling amounts to 8.7%, which is higher than OLS estimates and quite similar to conventional instrumental variable estimates.

Keywords: returns to schooling, human capital, heterogeneity

JEL Classification: J21, J24, J31

Suggested Citation

Pfeiffer, Friedhelm and Pohlmeier, Winfried, Causal Returns to Schooling and Individual Heterogeneity. IZA Discussion Paper No. 6588, Available at SSRN: https://ssrn.com/abstract=2085175 or http://dx.doi.org/10.2139/ssrn.2085175

Friedhelm Pfeiffer (Contact Author)

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
++49 (0)621/1235-150 (Phone)
++49 (0)621/1235-225 (Fax)

University of Mannheim - Department of Economics

D-68131 Mannheim
Germany

IZA Institute of Labor Economics

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

Winfried Pohlmeier

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE) ( email )

Konstanz, D-78457
Germany

HOME PAGE: http://econometrics.wiwi.uni-konstanz.de

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