Returns to Women's Education Using Optimal IV Selection

36 Pages Posted: 8 Sep 2016 Last revised: 10 Sep 2018

See all articles by Jun Sung Kim

Jun Sung Kim

Monash University - Department of Econometrics & Business Statistics

Bin Jiang

Monash University

Chuhui Li

Monash University

Hee-Seung Yang

Yonsei University

Date Written: September 3, 2018

Abstract

This paper investigates returns to women’s education by applying an optimal IV selection approach, post-Lasso IV estimation, which improves the first-stage predictive relationship between an endogenous regressor and instruments. Using the 2010 American Community Survey, we find that an extra year of education increases married women’s own income by $4,480 and spouse income by $8,822. Our findings indicate that 53% of the increase in women’s consumption by education is attributed to the marriage market, and thus, we conclude that the marriage market is the primary channel through which education improves women’s well-being. The results demonstrate the advantages of the post-Lasso approach: The resulting two-stage least squares estimator maintains efficiency without increasing finite sample bias and is less subject to the inconsistency problem when some instruments are invalid; This differs from the results using the instrument of birth quarters only, which is mostly applied in studies on returns to education.

Keywords: Instrumental variables estimation; Optimal instruments; Post-Lasso; Returns to women’s education; Spouse income

JEL Classification: C26, I21, I26, J12

Suggested Citation

Kim, Jun Sung and Jiang, Bin and Li, Chuhui and Yang, Hee-Seung, Returns to Women's Education Using Optimal IV Selection (September 3, 2018). Available at SSRN: https://ssrn.com/abstract=2835815 or http://dx.doi.org/10.2139/ssrn.2835815

Jun Sung Kim (Contact Author)

Monash University - Department of Econometrics & Business Statistics ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Bin Jiang

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Chuhui Li

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Hee-Seung Yang

Yonsei University ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 03722
Korea, Republic of (South Korea)
82 2 2123 2480 (Phone)

HOME PAGE: http://sites.google.com/site/heeseungyang/

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