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: Jan-2003
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. School of Economics
Copyright (published version): UCD School of Economics 2003
Keywords: Identification;Returns to education
Subject LCSH: Education--Economic aspects
Wages--Effect of education on
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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