The causal effect of education on wages revisited

Reference:

Dickson, M., 2013. Forthcoming. The causal effect of education on wages revisited. Oxford Bulletin of Economics and Statistics

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Official URL:

http://dx.doi.org/10.1111/j.1468-0084.2012.00708.x

Abstract

This study estimates the return to education in Britain using two instrumental variable (IV) estimators: one exploits variation in schooling associated with early smoking, the other uses the raising of the school leaving age; both affect a sizeable proportion of the sample. Early smoking is found to be a strong and valid IV and unlike previous IV strategies uses variations in education at numerous points across the distributions of (i) education, and (ii) ability. Thus whilst still a ‘local average treatment effect’ the estimate is closer to the average effect of additional education, akin to least squares but corrected for endogeneity.

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