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Forced to be Rich? Returns to Compulsory Schooling in Britain

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Author Info
Devereux, Paul J.
Hart, Robert A

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Abstract

Do students benefit from compulsory schooling? Researchers using changes in compulsory schooling laws as instruments have typically estimated very high returns to additional schooling that are greater than the corresponding OLS estimates and concluded that the group of individuals who are influenced by the law change have particularly high returns to education. That is, the Local Average Treatment Effect (LATE) is larger than the average treatment effect (ATE). However, studies of a 1947 British compulsory schooling law change that impacted about half the relevant population have also found very high instrumental variables returns to schooling (about 15%), suggesting that the ATE of schooling is also very high and higher than OLS estimates suggest. We utilize the New Earnings Survey Panel Data-set (NESPD), that has superior earnings information compared to the datasets previously used and find instrumental variable estimates that are small and much lower than OLS. In fact, there is no evidence of any positive return for women and the return for men is in the 4-7% range. These estimates provide no evidence that the ATE of schooling is very high.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6679.

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Date of creation: Feb 2008
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Handle: RePEc:cpr:ceprdp:6679

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Related research
Keywords: compulsory schooling; return to education;

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J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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  1. James Banks & Richard Blundell, 2005. "Private pension arrangements and retirement in Britain," Fiscal Studies, Institute for Fiscal Studies, vol. 26(1), pages 35-53, March.
  2. Jörn-Steffen Pischke & Till von Wachter, 2005. "Zero Returns to Compulsory Schooling in Germany: Evidence and Interpretation," IZA Discussion Papers 1645, Institute for the Study of Labor (IZA). [Downloadable!]
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  3. Philip Oreopoulos & Marianne E. Page, 2006. "The Intergenerational Effects of Compulsory Schooling," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 729-760, October.
    Other versions:
  4. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital," American Economic Review, American Economic Association, vol. 95(1), pages 437-449, March. [Downloadable!]
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  5. Angrist, Joshua D & Krueger, Alan B, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 979-1014, November. [Downloadable!] (restricted)
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  6. Oreopoulos, Philip, 2007. "Do dropouts drop out too soon? Wealth, health and happiness from compulsory schooling," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2213-2229, December. [Downloadable!] (restricted)
  7. Atsushi Inoue & Gary Solon, 2005. "Two-Sample Instrumental Variables Estimators," NBER Technical Working Papers 0311, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Philip Oreopoulos, 2006. "Estimating Average and Local Average Treatment Effects of Education when Compulsory Schooling Laws Really Matter," American Economic Review, American Economic Association, vol. 96(1), pages 152-175, March. [Downloadable!]
  9. SandraE. Black & PaulJ. Devereux & KjellG. Salvanes, 2008. "Staying in the Classroom and out of the maternity ward? The effect of compulsory schooling laws on teenage births," Economic Journal, Royal Economic Society, vol. 118(530), pages 1025-1054, 07. [Downloadable!] (restricted)
  10. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March. [Downloadable!] (restricted)
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  11. Milligan, Kevin & Moretti, Enrico & Oreopoulos, Philip, 2004. "Does education improve citizenship? Evidence from the United States and the United Kingdom," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1667-1695, August. [Downloadable!] (restricted)
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  13. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
  14. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December. [Downloadable!] (restricted)
  15. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," American Economic Review, American Economic Association, vol. 96(4), pages 1308-1320, September. [Downloadable!]
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  16. Adriana Lleras-Muney, 2005. "The Relationship Between Education and Adult Mortality in the United States," Review of Economic Studies, Blackwell Publishing, vol. 72(1), pages 189-221, 01. [Downloadable!] (restricted)
  17. Manning, Alan, 2000. "Movin' on up: Interpreting the Earnings-Experience Profile," Bulletin of Economic Research, Blackwell Publishing, vol. 52(4), pages 261-95, October.
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  18. Maarten Lindeboom & Ana Llena-Nozal & Bas van der Klaauw, 2006. "Parental Education and Child Health: Evidence from a Schooling Reform," IZA Discussion Papers 2516, Institute for the Study of Labor (IZA). [Downloadable!]
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  19. David S. Lee & David Card, 2006. "Regression Discontinuity Inference with Specification Error," NBER Technical Working Papers 0322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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