Earnings, Schooling, and Ability Revisited

45 Pages Posted: 1 Jul 2003 Last revised: 17 Sep 2010

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: August 1994

Abstract

This paper presents a survey and interpretation of recent research on the return to education. The empirical findings in a series of current papers suggest that the causal effect of education on earnings is understated by standard estimation methods. Using a simple model of optimal schooling developed by Gary Becker (1967), I derive an explicit formula for the conventional estimate of the return to schooling and for alternative instrumental variables and fixed- effects estimators. The analysis suggests that instrumental variables estimates based on 'interventions' that affect the schooling choices of children from relatively disadvantaged family backgrounds will tend to exceed the corresponding OLS estimates.

Suggested Citation

Card, David E., Earnings, Schooling, and Ability Revisited (August 1994). NBER Working Paper No. w4832. Available at SSRN: https://ssrn.com/abstract=420314

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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Germany

National Bureau of Economic Research (NBER)

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