Using Geographic Variation in College Proximity to Estimate the Return to Schooling

37 Pages Posted: 29 Dec 2003

See all articles by David Card

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Date Written: October 1993

Abstract

A convincing analysis of the causal link between schooling and earnings requires an exogenous source of variation in education outcomes. This paper explores the use of college proximity as an exogenous determinant of schooling. Analysis of the NLS Young Men Cohort reveals that men who grew up in local labor markets with a nearby college have significantly higher education and earnings than other men. The education and earnings gains are concentrated among men with poorly-educated parents -- men who would otherwise stop schooling at relatively low levels. When college proximity is taken as an exogenous determinant of schooling the implied instrumental variables estimates of the return to schooling are 25-60% higher than conventional ordinary least squares estimates. Since the effect of a nearby college on schooling attainment varies by family background it is possible to test whether college proximity is a legitimately exogenous determinant of schooling. The results affirm that marginal returns to education among children of less-educated parents are as high and perhaps much higher than the rates of return estimated by conventional methods.

Suggested Citation

Card, David E., Using Geographic Variation in College Proximity to Estimate the Return to Schooling (October 1993). NBER Working Paper No. w4483. Available at SSRN: https://ssrn.com/abstract=420302

David E. Card (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Institute for the Study of Labor (IZA)

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National Bureau of Economic Research (NBER)

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