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Educational Expansion and Its Heterogeneous Returns for Wage Workers

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  • Michael Gebel
  • Friedhelm Pfeiffer

Abstract

This paper examines the evolution of returns to education in the West German labour market over the last two decades. During this period, graduates from the period of educational expansion entered the labour market and an upgrading of the skill structure took place. In order to tackle the issues of endogeneity of schooling and its heterogeneous returns we apply two estimation methods: Wooldridge's (2004) approach that relies on conditional mean independence and Garen's (1984) control function approach that requires an exclusion restriction. For the population of workers from the SOEP, we find that both approaches produce estimates of average returns to education that decrease until the late 1990s and increase afterwards. The gender gap in returns to education seems to vanish. Furthermore, we find that the so-called "baby boomer" cohort has the lowest average return to education in young ages. However, this effect disappears over time.

Suggested Citation

  • Michael Gebel & Friedhelm Pfeiffer, 2007. "Educational Expansion and Its Heterogeneous Returns for Wage Workers," SOEPpapers on Multidisciplinary Panel Data Research 13, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp13
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    References listed on IDEAS

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    Cited by:

    1. Laucht, Manfred & Coneus, Katja & Blomeyer, Dorothea & Pfeiffer, Friedhelm, 2008. "Self-Productivity and Complementarities in Human Development: Evidence from MARS," ZEW Discussion Papers 08-067, ZEW - Leibniz Centre for European Economic Research.
    2. Friedhelm PFEIFFER & Winfried POHLMEIER, 2011. "Causal Returns to Schooling and Individual Heterogeneity," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 29-41, December.
    3. Markus Klein, 2016. "The association between graduates’ field of study and occupational attainment in West Germany, 1980–2008 [Der Zusammenhang zwischen Studienfach und beruflichem Erfolg von Hochschulabsolventen in We," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(1), pages 43-58, July.
    4. Pfeiffer, Friedhelm & Reuß, Karsten, 2008. "Age-dependent skill formation and returns to education," Labour Economics, Elsevier, vol. 15(4), pages 631-646, August.
    5. Dorothea Blomeyer & Katja Coneus & Manfred Laucht & Friedhelm Pfeiffer, 2009. "Initial Risk Matrix, Home Resources, Ability Development, and Children's Achievement," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 638-648, 04-05.
    6. Stephan O. Hornig & Horst Rottmann & Rüdiger Wapler, 2009. "Information Asymmetry, Education Signals and the Case of Ethnic and Native Germans," CESifo Working Paper Series 2683, CESifo.
    7. Blomeyer, Dorothea & Coneus, Katja & Laucht, Manfred & Pfeiffer, Friedhelm, 2008. "Self-Productivity and Complementarities in Human Development: Evidence from the Mannheim Study of Children at Risk," IZA Discussion Papers 3734, Institute of Labor Economics (IZA).
    8. Daniel Kemptner & Jan Marcus, 2011. "Spillover Effects of Maternal Education on Child's Health and Schooling," SOEPpapers on Multidisciplinary Panel Data Research 375, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Regina T. Riphahn & Martina Eschelbach & Guido Heineck & Steffen Müller, 2010. "Kosten und Nutzen der Ausbildung an Tertiärbildungsinstitutionen im Vergleich," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(2), pages 103-131, May.
    10. Brunello, Giorgio & Crivellaro, Elena & Rocco, Lorenzo, 2010. "Lost in Transition? The Returns to Education Acquired under Communism 15 Years after the Fall of the Berlin Wall," IZA Discussion Papers 5409, Institute of Labor Economics (IZA).
    11. Concetta Mendolicchio & Thomas Rhein, 2014. "The gender gap of returns on education across West European countries," International Journal of Manpower, Emerald Group Publishing Limited, vol. 35(3), pages 219-249, May.
    12. Felix Busch, 2020. "Gender Segregation, Occupational Sorting, and Growth of Wage Disparities Between Women," Demography, Springer;Population Association of America (PAA), vol. 57(3), pages 1063-1088, June.
    13. Friedrich, Anett & Horn, Sandra, 2018. "Qualifikatorische Bildungsrenditen in verschiedenen Datenquellen," Wissenschaftliche Diskussionspapiere, Federal Institute for Vocational Education and Training (BIBB), Bonn, volume 127, number 197, July.
    14. Cornelissen Thomas & Jirjahn Uwe & Tsertsvadze Georgi, 2008. "Parental Background and Earnings: German Evidence on Direct and Indirect Relationships," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 554-572, October.

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    More about this item

    Keywords

    Returns to Education; Human Capital; Skill Upgrading; Wage Work;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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