Years and Intensity of Schooling Investing / Arleen Leibowitz.

By:

Leibowitz, Arleen

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0049.Publication details: Cambridge, Mass. National Bureau of Economic Research 1974.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: An essential feature of schooling is not only that it occurs in a different site than most on-the-job training but also that it is more intensive. That is, a smaller proportion of gross potential earnings is sacrificed in on-the-job training than in schooling. In estimating human capital earnings functions it has generally been assumed that during schooling 100% of gross potential earnings are invested in all years, while in on-the-job training this percentage is smaller and is a declining function of age. This assumption has been quite useful since it allows the identification of an estimate of the rate of return on schooling from a regression of earnings on years of schooling. This paper argues that the percentage of gross earnings invested may fall below 100% well before schooling is ended, that this percentage is likely to be correlated with years of schooling, and thus this procedure yields only a biased estimate of the rate of return to schooling.

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Working Paper	Biblioteca Digital	Colección NBER	nber w0049 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w0046 The Singular Value Analysis in Matrix Computation /	nber w0047 The Distribution of Earnings and Human Wealth in Cycle Context /	nber w0048 Protection and Competitiveness in Egyptian Agriculture and Industry /	nber w0049 Years and Intensity of Schooling Investing /	nber w0050 Measuring the Effect of an Anti-Discrimination Program /	nber w0051 Age, Experience and Wage Growth /	nber w0052 Transportation/Communication Considerations in the Location of Headquarters for Multi-Establishment Manufacturing Firms /	Next

August 1974.

An essential feature of schooling is not only that it occurs in a different site than most on-the-job training but also that it is more intensive. That is, a smaller proportion of gross potential earnings is sacrificed in on-the-job training than in schooling. In estimating human capital earnings functions it has generally been assumed that during schooling 100% of gross potential earnings are invested in all years, while in on-the-job training this percentage is smaller and is a declining function of age. This assumption has been quite useful since it allows the identification of an estimate of the rate of return on schooling from a regression of earnings on years of schooling. This paper argues that the percentage of gross earnings invested may fall below 100% well before schooling is ended, that this percentage is likely to be correlated with years of schooling, and thus this procedure yields only a biased estimate of the rate of return to schooling.