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Skill, parental income, and IV estimation of the returns to schooling

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  • Robert J. Lemke
  • Isaac C. Rischall

Abstract

Recently, attention has moved away from using parental background variables, such as parental education, in favour of using institutional features of the education system as instruments when estimating the return to schooling. In this paper, these possible instruments are revisited. Using the National Longitudinal Survey of Youth, several specifications of the wage equation are estimated and three types of instruments used - parental education, quarter of birth, and college proximity. It is shown that under some specifications - in particular, by including parental income and individual skill in the wage equation - parental education appears to be a valid and useful instrument. On the other hand, when using the institutional instruments, the weak correlation between the instruments and years of schooling produces imprecise and likely biased estimates of the return to schooling.

Suggested Citation

  • Robert J. Lemke & Isaac C. Rischall, 2003. "Skill, parental income, and IV estimation of the returns to schooling," Applied Economics Letters, Taylor & Francis Journals, vol. 10(5), pages 281-286, April.
    • Handle: RePEc:taf:apeclt:v:10:y:2003:i:5:p:281-286
    DOI: 10.1080/13504850320000078653
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    References listed on IDEAS

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    Cited by:

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    2. Sanjaya DeSilva & Mohammed Mehrab Bin Bakhtiar, 2011. "Women, Schooling, and Marriage in Rural Philippines," Economics Working Paper Archive wp_701, Levy Economics Institute.
    3. Nazim Habibov & Elvin Afandi & Alex Cheung, 2017. "What is the effect of university education on chances to be self-employed in transitional countries?: Instrumental variable analysis of cross-sectional sample of 29 nations," International Entrepreneurship and Management Journal, Springer, vol. 13(2), pages 487-500, June.
    4. Jörg Breitung & Alexander Mayer & Dominik Wied, 2024. "Asymptotic properties of endogeneity corrections using nonlinear transformations," The Econometrics Journal, Royal Economic Society, vol. 27(3), pages 362-383.
    5. Long, Mark C., 2008. "College quality and early adult outcomes," Economics of Education Review, Elsevier, vol. 27(5), pages 588-602, October.
    6. Florence Neymotin, 2014. "How Parental Involvement Affects Childhood Behavioral Outcomes," Journal of Family and Economic Issues, Springer, vol. 35(4), pages 433-451, December.
    7. Rietveld, Cornelius A. & Webbink, Dinand, 2016. "On the genetic bias of the quarter of birth instrument," Economics & Human Biology, Elsevier, vol. 21(C), pages 137-146.
    8. Kasey S. Buckles & Daniel M. Hungerman, 2013. "Season of Birth and Later Outcomes: Old Questions, New Answers," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 711-724, July.
    9. Tamar Khitarishvili, 2010. "Assessing the Returns to Education in Georgia," Economics Working Paper Archive wp_608, Levy Economics Institute.
    10. Mika Haapanen & Petri Böckerman, 2017. "More educated, more mobile? Evidence from post-secondary education reform," Spatial Economic Analysis, Taylor & Francis Journals, vol. 12(1), pages 8-26, January.

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