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Evaluating the impact of education on earnings in the UK: Models, methods and results from the NCDS

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Author Info
Richard Blundell () (Institute for Fiscal Studies and University College London)
Lorraine Dearden () (Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London)
Barbara Sianesi () (Institute for Fiscal Studies)

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Abstract

Regression, matching, control function and instrumental variables methods for recovering the impact of education on individual earnings are reviewed for single treatment and sequential multiple treatments with and without heterogeneous returns. The sensitivity of the estimates once applied to a common dataset is then explored. We show the importance of correcting for detailed test score and family background differences and of allowing for (observable) heterogeneity in returns. We find an average return of 27% for those completing higher education versus anything less. Compared to stopping at 16 without qualifications, we find an average return to O-levels of 18%, to A-levels of 24% and to higher education of 48%.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W03/20.

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Length: 52 pp
Date of creation: Nov 2003
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Handle: RePEc:ifs:ifsewp:03/20

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  2. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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  6. Lorraine Dearden, 1999. "Qualifications and earnings in Britain: how reliable are conventional OLS estimates of the returns to education?," IFS Working Papers W99/07, Institute for Fiscal Studies. [Downloadable!]
  7. Joshua D. Angrist & Alan B. Krueger, 1992. "Estimating the Payoff to Schooling Using the Vietnam-Era Draft Lottery," NBER Working Papers 4067, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Human Capital and Productivity Project Working Papers 20035, University of Western Ontario, CIBC Human Capital and Productivity Project. [Downloadable!]
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  9. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
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  15. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Blackwell Publishing, vol. 64(4), pages 605-54, October. [Downloadable!] (restricted)
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  17. 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)
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  21. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  22. Butcher, Kristin F & Case, Anne, 1994. "The Effect of Sibling Sex Composition on Women's Education and Earnings," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 531-63, August. [Downloadable!] (restricted)
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  29. Steven Mcintosh, 2006. "Further Analysis of the Returns to Academic and Vocational Qualifications," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(2), pages 225-251, 04. [Downloadable!] (restricted)
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