Returns to Schooling in Kazakhstan: Ols and Instrumental Variables Approach
35 Pages Posted: 5 Dec 2006
Date Written: November 2006
This paper examines rates of return to schooling in Kazakhstan using OLS and instrumental variable (IV) methodologies. We use spouse's education and smoking as instruments. We find that spouse's education is a valid instrument and that conventional OLS estimates that assume the exogenous nature of schooling, and hence do not control for endogeneity bias, may underestimate the true rates of return. The results indicate that the returns to schooling in Kazakhstan have increased with transition. This may reflect the relative scarcities of highly educated people in Kazakhstan with human capital that employers require and, following the market reforms, reward accordingly.
Keywords: human capital, instrumental variables, rate of return to education
JEL Classification: C13, I21, J24
Suggested Citation: Suggested Citation