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Monetary returns to upper secondary schooling, the evolution of unobserved heterogeneity, and implications for employer learning

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  • Krumme, Anna
  • Westphal, Matthias

Abstract

We study the evolution of monetary returns to high school education and their heterogeneity after the labor market entry using linked survey and administrative labor market data from Germany. By exploiting academic track school openings for cohorts from 1950–1985, we find sizeable monetary returns of 14–17% per year of additional schooling within the first 10 years of labor market experience. Whereas unobserved heterogeneity in the returns is initially uncorrelated with the schooling decision, the correlation starts evolving at higher levels of labor market experience. We interpret this finding considering employer learning – so far unconsidered in the literature.

Suggested Citation

  • Krumme, Anna & Westphal, Matthias, 2024. "Monetary returns to upper secondary schooling, the evolution of unobserved heterogeneity, and implications for employer learning," Ruhr Economic Papers 1130, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:311301
    DOI: 10.4419/96973312
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    More about this item

    Keywords

    Returns to education; IV estimation; marginal treatment effects; unobserved heterogeneity; employer learning;
    All these keywords.

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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