Interpreting Instrumental Variables Estimates of the Returns to Schooling / Jeffrey R. Kling.

By:

Kling, Jeffrey R

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w7989.Publication details: Cambridge, Mass. National Bureau of Economic Research 2000.Description: 1 online resource: illustrations (black and white)Subject(s):

J3 - Wages, Compensation, and Labor Costs

Online resources:

Available additional physical forms:

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Abstract: This paper synthesizes economic insights from theoretical models of schooling choice based on individual benefits and econometric work interpreting instrumental variables estimates as weighted averages of individual-specific causal effects. Linkages are illustrated using college proximity to instrument for schooling. After characterizing groups differentially affected by the instrument according to family background, I directly compute weights underlying estimation of the overall return. In analyzing the level of schooling at which individuals change their behavior in response to the instrument, I demonstrate that this instrument has its greatest impact on the transition from high school to college. Specification robustness is also examined.

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October 2000.

This paper synthesizes economic insights from theoretical models of schooling choice based on individual benefits and econometric work interpreting instrumental variables estimates as weighted averages of individual-specific causal effects. Linkages are illustrated using college proximity to instrument for schooling. After characterizing groups differentially affected by the instrument according to family background, I directly compute weights underlying estimation of the overall return. In analyzing the level of schooling at which individuals change their behavior in response to the instrument, I demonstrate that this instrument has its greatest impact on the transition from high school to college. Specification robustness is also examined.