K-Returns to Education

48 Pages Posted: 29 Jan 2020

See all articles by Andreas Fagereng

Andreas Fagereng

BI Norwegian Business School; Statistics Norway

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF)

Martin Blomhoff Holm

University of Oslo

Luigi Pistaferri

Stanford University; Centre for Economic Policy Research (CEPR)

Date Written: January 2020


We exploit a school reform that increased the length of compulsory schooling in Norway in the 1960s to study the causal effect of formal general education on returns on wealth (k-returns). OLS estimates reveal a strong, positive and statistically significant correlation between education and returns on individual net worth. This effect disappears in IV regressions, implying that general education has no causal effect on individual performance in capital markets, whose heterogeneity largely reflects non-acquired ability. On the contrary, we find that education causes higher returns in the labor market (l-returns). We speculate about possible rationales for this important asymmetry.

Keywords: Returns to capital, Returns to education

JEL Classification: G0, I0, J3

Suggested Citation

Fagereng, Andreas and Guiso, Luigi and Holm, Martin Blomhoff and Pistaferri, Luigi, K-Returns to Education (January 2020). CEPR Discussion Paper No. DP14310. Available at SSRN: https://ssrn.com/abstract=3526034

Andreas Fagereng (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442

Statistics Norway ( email )

Postboks 8131 Dep, 0033 Oslo
Oslo, Oslo 0033
+47 2109 4700 (Phone)

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

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Martin Blomhoff Holm

University of Oslo ( email )

Moltke Moes Vei 31
Oslo, 0851

Luigi Pistaferri

Stanford University ( email )

Stanford, CA 94305
United States

Centre for Economic Policy Research (CEPR)

United Kingdom

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