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College education and wages in the U.K.: estimating conditional average structural functions in nonadditive models with binary endogenous variables

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  • Tobias Klein

Abstract

Recent studies debate how the unobserved dependence between the monetary return to college education and selection into college can be characterised. This paper examines this question using British data. We develop a semiparametric local instrumental variables estimator for identified features of a flexible correlated random coefficient model. These identified features are directly related to the marginal and average treatment effect in policy evaluation. Our results indicate that returns to college systematically differ between actual college graduates and actual college non-graduates. They are on average higher for college graduates and positively related to selection into college for 96% of the individuals. The dependence between selection into college and returns to college education is strongest for individuals with low math test scores at the age of 7, individuals with less educated mothers, and for working-class individuals. Copyright The Author(s) 2013

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  • Tobias Klein, 2013. "College education and wages in the U.K.: estimating conditional average structural functions in nonadditive models with binary endogenous variables," Empirical Economics, Springer, vol. 44(1), pages 135-161, February.
    • Handle: RePEc:spr:empeco:v:44:y:2013:i:1:p:135-161
    DOI: 10.1007/s00181-010-0355-x
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    Cited by:

    1. Bernd Fitzenberger & Michael Lechner & Jeffrey Smith, 2013. "Estimation of treatment effects: recent developments and applications," Empirical Economics, Springer, vol. 44(1), pages 1-11, February.
    2. Klein, Tobias J., 2010. "Heterogeneous treatment effects: Instrumental variables without monotonicity?," Journal of Econometrics, Elsevier, vol. 155(2), pages 99-116, April.
    3. Serge Atherwood & Corey S Sparks, 2019. "Early-career trajectories of young workers in the U.S. in the context of the 2008–09 recession: The effect of labor market entry timing," PLOS ONE, Public Library of Science, vol. 14(3), pages 1-30, March.
    4. Benjamin Williams, 2019. "Identification of a nonseparable model under endogeneity using binary proxies for unobserved heterogeneity," Quantitative Economics, Econometric Society, vol. 10(2), pages 527-563, May.

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    More about this item

    Keywords

    Returns to college education; Correlated random coefficient model; Local instrumental variables estimation; C14; C31; J31;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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