Returns to Schooling: A Selectivity Bias Approach with Continuous Variable Choice for Brazil

Catholic University of Brasilia Working Paper

20 Pages Posted: 19 Sep 2002

See all articles by Adolfo Sachsida

Adolfo Sachsida

Institute for Applied Economic Research (IPEA); Institute of Applied Economic Research (IPEA)

Paulo R. A. Loureiro

University of Brasília- UnB

Mario Jorge Cardoso Mendonca

Institute of Applied Economic Research (IPEA) - Directory of Macroeconomic Policy & Studies (DIMAC)

Date Written: July 2002

Abstract

The objective of this paper is to investigate the returns to schooling issue for Brazil based on four distinct methodologies, in order to reach a reliable estimate for this type of measurement. The first is based on a simple estimate of the returns to schooling equation by OLS. However, considering that the coefficients obtained by this method may be biased, due to endogeneity problems as well as the omission of the "abilities" variable, the paper investigates the issue further by inquiring into two possible sources of selection bias. The first one suggests that said bias is caused by the job search strategy adopted by the agent. In this case, wages do not depend solely on the wage supply but also on a job-search strategy [Gronau (1974)]. Second, in this paper we use the methodology developed by Garen (1984) that allows the optimal choice of years of schooling, since this variable is continuous and variable, which means that the problem may be dealt with at a higher degree of practicality. Lastly, a pseudo-panel analysis is conducted in an attempt to deal with the relevant variable omission problem in the model.

Keywords: Returns to schooling, endogeneity, wages, job-search, selectivity bias

JEL Classification: C31, I29

Suggested Citation

Sachsida, Adolfo and Loureiro, Paulo R. A. and Cardoso Mendonca, Mario Jorge, Returns to Schooling: A Selectivity Bias Approach with Continuous Variable Choice for Brazil (July 2002). Catholic University of Brasilia Working Paper, Available at SSRN: https://ssrn.com/abstract=325000 or http://dx.doi.org/10.2139/ssrn.325000

Adolfo Sachsida (Contact Author)

Institute for Applied Economic Research (IPEA) ( email )

SBS Ed. BNDES Quadra 1
7o. andar
Brasilia DF 7000-010
Brazil
+55 61 2026-5025 (Phone)
+55 61 315-5448 (Fax)

HOME PAGE: http://www.bdadolfo.blogspot.com

Institute of Applied Economic Research (IPEA) ( email )

Av. Pres. Antonio Carlos , 51 - 17 andar
Rio de Janeiro, RJ, 20020-010
Brazil

Paulo R. A. Loureiro

University of Brasília- UnB ( email )

Campus Darcy Ribeiro-Asa Norte 70362-010 - Brasil
Brasilia, DF 70362-010
Brazil

HOME PAGE: http://www.pauloloureiro.unb.br/

Mario Jorge Cardoso Mendonca

Institute of Applied Economic Research (IPEA) - Directory of Macroeconomic Policy & Studies (DIMAC) ( email )

Av. Presidente Antonio Carlos 51
10 Andar Centro
Rio de Janeiro RJ 20020-010
Brazil

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