Using heteroscedasticity to estimate the returns to education

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Title: Using heteroscedasticity to estimate the returns to education
Authors: Hogan, Vincent (Vincent Peter)
Rigobon, Roberto
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Date: 14-Jun-2002
Abstract: We apply a new estimator to the measurement of the economic returns to education. We control for endogenous education, unobserved ability and measurement error using only the natural heteroscedasticty of wages and education attainment. Our prefered estimate, 6.07%, is closer to the OLS estimate but smaller (and more precise) than the estimates typically reported by studies that use IV. Our results indicate that the biases generated by unobserved ability and measurement error tend to cancel each other out as suggested by Griliches (1977). We also present Monte Carlo evidence to show that the finite sample bias our estimator is small.
Type of material: Working Paper
Publisher: University College Dublin. Institute for the Study of Social Change (Geary Institute)
Series/Report no.: ISSC Discussion Paper Series; 2002/07
Copyright (published version): Institute for the Study of Social Change, 2002
Keywords: IdentificationReturns to Education
Subject LCSH: Education--Economic aspects
Wages--Effect of education on
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Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers
Economics Research Collection

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