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Estimating marginal returns to education

Author

Listed:
  • Pedro Carneiro

    (Institute for Fiscal Studies and University College London)

  • James Heckman

    (Institute for Fiscal Studies and University of Chicago)

  • Edward Vytlacil

    (Institute for Fiscal Studies and NYU)

Abstract

This paper estimates the marginal returns to college for individuals induced to enroll in college by different marginal policy changes. The recent instrumental variables literature seeks to estimate this parameter, but in general it does so only under strong assumptions that are tested and found wanting. We show how to utilize economic theory and local instrumental variables estimators to estimate the effect of marginal policy changes. Our empirical analysis shows that returns are higher for individuals more likely to attend college. We contrast the returns to well-defined marginal policy changes with IV estimates of the return to schooling. Some marginal policy changes inducing students into college produce very low returns.

Suggested Citation

  • Pedro Carneiro & James Heckman & Edward Vytlacil, 2010. "Estimating marginal returns to education," CeMMAP working papers CWP29/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:29/10
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    File URL: http://cemmap.ifs.org.uk/wps/cwp2910.pdf
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    References listed on IDEAS

    as
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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