Bayesian inference in a correlated random coefficients model: Modeling causal effect heterogeneity with an application to heterogeneous returns to schooling

We consider the problem of causal effect heterogeneity from a Bayesian point of view. This is accomplished by introducing a three-equation system, similar in spirit to the work of Heckman and Vytlacil (1998), describing the joint determination of a scalar outcome, an endogenous “treatment” variable, and an individual-specific causal return to that treatment. We describe a Bayesian posterior simulator for fitting this model which recovers far more than the average causal effect in the population, the object which has been the focus of most previous work. Parameter identification and generalized methods for flexibly modeling the outcome and return heterogeneity distributions are also discussed.Combining data sets from High School and Beyond (HSB) and the 1980 Census, we illustrate our methods in practice and investigate heterogeneity in returns to education. Our analysis decomposes the impact of key HSB covariates on log wages into three parts: a “direct” effect and two separate indirect effects through educational attainment and returns to education. Our results strongly suggest that the quantity of schooling attained is determined, at least in part, by the individual’s own return to education. Specifically, a one percentage point increase in the return to schooling parameter is associated with the receipt of (approximately) 0.14 more years of schooling. Furthermore, when we control for variation in returns to education across individuals, we find no difference in predicted schooling levels for men and women. However, women are predicted to attain approximately 1/4 of a year more schooling than men on average as a result of higher rates of return to investments in education.     

The Returns to Education: Microeconomics

In this paper we focus on education as a private decision to invest in "human capital" and the estimation of the rate of return to that private investment. While the literature is replete with studies that estimate the rate of return using regression methods where the estimated return is obtained as the coefficient on a years of education variable in a log wage equation that contains controls for work experience and other individual characteristics, the issue is surrounded with difficulties. We outline the theoretical arguments underpinning the empirical developments and show that the evidence on private returns to the individual is compelling. Despite some of these issues surrounding the estimation of the return to schooling, our evidence, based on estimates from a variety of datasets and specifications, is that there is an unambiguously positive effect on the earnings of an individual from participation in education. Moreover, the size of the effect seems large relative to the returns on other investments.     

The effects of families and ability on men's education and earnings in Britain

The paper estimates the returns to education for a cohort of men born in Britain in March 1958 who have been followed since birth until the age of 33. The data used has a wealth of information on family background including parental education, social class and interest shown in the child's education as well as measures of ability. These variables are typically missing in studies looking at the returns to schooling. In the paper, we find that the average return to an additional year of full-time education for the UK men is somewhere around 5 1/2% to 6% even after correcting for the effects of measurement error. The paper also presents evidence that the returns to an additional year of schooling in the UK are heterogeneous. In particular, the paper finds some evidence that men with lower tastes for education, have significantly higher marginal returns to education. The results of the paper suggest that recent IV estimates of the returns to schooling in the UK, which exceed typical OLS estimates, may overestimate the average marginal return for the population of men as a whole.     

Estimates of the return to schooling and ability: evidence from sibling data

We use sibling data on wages, schooling, and aptitude test scores from the 1979 National Longitudinal Survey of Youth (NLSY79) to obtain OLS, family fixed effects, and fixed effects instrumental variable estimates of the return to schooling for a large sample of non-twin siblings. Following recent studies that use identical twin samples, we use sibling-reported schooling as an instrument for self-reported schooling. Controlling for aptitude test scores has a substantial impact on estimated returns to schooling even within families, and there is a large return to test scores that is comparable in size within and between families. We also find that the return to schooling is higher for older brothers than for younger brothers and for women than men. Finally, because the NLSY79 contains multiple sibling reports of education for the same individual, we are able to test and reject the overidentifying restrictions for the validity of sibling-reported schooling as an instrumental variable.     

Returns to education and wages in Turkey: robust and resistant regression

In this study, we follow the human capital theory for wage determination and analyze the differentials in returns to education, returns to experience and gender wage gap using usual mincerian wage equation by using OLS, robust and resistant regressions. This study presents evidence on the returns to education in Turkey. The results clearly show that for female employees, education to returns is higher than for male employees. When the results of returns to experience have been studied, it is observed that males definitely have a higher return than females in the years 2003 and 2006.     

Doubly Robust Estimation of Causal Effects with Multivalued Treatments: An Application to the Returns to Schooling

This paper provides doubly robust estimators for treatment effect parameters which are defined in a multivalued treatment effect framework. We apply this method to the unique dataset of the 1970 British Cohort Study (BCS70) to estimate returns to various levels of schooling. The analysis is carried out for female and male samples separately to capture possible gender differences. Average returns are estimated for the entire population, as well as conditional on having a specific educational achievement. For males, relative to no qualification, we find an average return to O‐levels of 6.3%, to A‐levels of 7.9% and to higher education of 25.4%. The estimated average returns to O‐level and A‐level relative to no qualification are insignificant for females, whereas the return to higher education is 19.9%.Copyright © 2014 John Wiley & Sons, Ltd.     

Returns to Schooling and Bayesian Model Averaging: A Union of Two Literatures

Abstract.  In this paper, we review and unite the literatures on returns to schooling and Bayesian model averaging. We observe that most studies seeking to estimate the returns to education have done so using particular (and often different across researchers) model specifications. Given this, we review Bayesian methods which formally account for uncertainty in the specification of the model itself, and apply these techniques to estimate the economic return to a college education. The approach described in this paper enables us to determine those model specifications which are most favored by the given data, and also enables us to use the predictions obtained from all of the competing regression models to estimate the returns to schooling. The reported precision of such estimates also account for the uncertainty inherent in the model specification. Using U.S. data from the National Longitudinal Survey of Youth (NLSY), we also revisit several 'stylized facts' in the returns to education literature and examine if they continue to hold after formally accounting for model uncertainty.     

Return Migration,Self‐selection and Entrepreneurship

Are return migrants more entrepreneurial? Existing literature has not addressed how estimating the impact of return migration on entrepreneurship is affected by double unobservable migrant self‐selection, both at the initial outward migration and at the final inward return migration stages. This paper exploits exogenous variation provided by the civil war and the incidence of agricultural plagues in Mozambique, as well as social unrest and other shocks in migrant destination countries. The results lend support to overall negative unobservable return migrant self‐selection, which results in an under‐estimation of the effects of return migration on entrepreneurial outcomes when using a ‘naïve’ estimator that does not control for self‐selection at both the initial migration and at the final return migration stages.     

Educational mismatch,wages, and wage growth: Overeducation in Sweden, 1974–2000

We examine the impact of educational mismatch on wages and wage growth in Sweden. The empirical analyses, based on cross-sectional and panel data from the Level of living surveys 1974–2000, are guided by two main hypotheses: (a) that educational mismatch reflects human capital compensation rather than real mismatch, and (b) that educational mismatch is real but dissolves with time spent in the labour market, so that its impact on wages tends toward zero over a typical worker's career. Our findings do not support these hypotheses. First, significant differences in contemporaneous economic returns to education across match categories remain even after variations in ability are taken into account. Second, we find no evidence that the rate of wage growth is higher among overeducated workers than others. Our conclusion is that the overeducated are penalized early on by an inferior rate of return to schooling from which they do not recover.     

基于企业创新创业的高技能人才培养的思考

经济全球化的高速发展,迫使企业必须不断创新创业,才能在激烈的市场竞争中获得更好的生存环境。因此,企业一方面要出资提供办学经费,支持高职院校在企业内部设立专业的教学机构和技能鉴定机构,出台在职员工继续教育的优惠制度,鼓励企业在职员工进行学历进修和专业技能培训,获取国际职业资格证书;另一方面企业与高职院校要共同出资设立奖学金,组建订单班,并将企业特有文化、国际运营理念、专业技能要求等融入其中,以培养出适合企业创新创业需要的国际化高技能专业人才。     

Estimating the returns to education for Australian youth via rank-order instrumental variables

This paper employs the rank-order instrumental variable (IV) procedure of Vella and Verbeek [Vella, F., Verbeek, M., 1997. Using rank order as an instrumental variable: an application to the return to schooling, CES Discussion Paper 97.10, K.U. Leuven.] to estimate the returns to education for Australian youth. The attraction of this approach is that it can account for the endogeneity of schooling in the wage equation via the use of instrumental variables without the use of exclusion restrictions. We find, after accounting for the endogeneity of schooling, that an additional year of schooling is associated with an increase in wages of approximately 8%. Furthermore, we find that the rank-order IV approach is able to identify the presence of endogeneity in this particular empirical example. However, despite this, the adjusted estimate of how schooling affects wage is close to the ordinary least squares (OLS) estimate.     

If You Are So Smart,Why Aren't You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs Versus Employees

How valuable are cognitive and social abilities for entrepreneurs’ relative to employees’ earnings? We answer three questions: (1) To what extent does a composite measure of ability affect an entrepreneur's earnings relative to wages earned by employees? (2) Do different cognitive abilities (e.g., math ability, language, or verbal ability) and social ability affect earnings of entrepreneurs and employees differently?, and (3) Does the balance in these measured ability levels affect an individual's earnings? Our (difference‐of‐difference) estimates of the returns to ability for spells in entrepreneurship versus wage employment account for selectivity into entrepreneurial positions insofar as they are determined by fixed individual characteristics. Our robust results provide the following answers to the three questions: General ability has a stronger impact on entrepreneurial incomes than on wages. Moreover, entrepreneurs and employees benefit from different sets of specific abilities: verbal and clerical abilities have a stronger impact on wages, whereas mathematical, social, and technical ability are more valuable for entrepreneurs. The balance in the various kinds of ability also generates a higher income, but only for entrepreneurs: This finding supports Lazear's Jack‐of‐all‐Trades theory.     

Entrepreneurship research in China: internationalization or contextualization?

Entrepreneurship is an emerging research field that has received much scholarly attention in recent decades. Given the global scope of this attention, this article compares entrepreneurship research in China with that in the USA and Europe. Based on publications in Social Science Citation Index and Chinese Social Science Citation Index databases over the past 10 years, we use bibliometric method to analyse entrepreneurship research in different regions. Our analysis shows that, on the one hand, entrepreneurship research in China has much in common with such research in the USA and Europe. In addition to borrowing ideas from Western researchers, Chinese entrepreneurship researchers study similar themes and use similar theoretical foundations. On the other hand, Chinese contextual environment helps preserve the uniqueness of its entrepreneurship research. Researchers deal with several context-specific topics such as guanxi, i.e. networks of interpersonal relationships, and its influence on entrepreneurship. We further discuss ways for Chinese researchers to explore the distinct context and contribute to the global literature.     

Convexity and Sheepskin Effects in the Human Capital Earnings Function: Recent Evidence for Filipino Men

The issue of possible non-linearities in the relationship between log wages and schooling has received a good deal of attention in the literature. This paper uses data from a recent, high quality household survey for the Philippines, the 1998 Annual Poverty Indicator Survey (APIS), to test the fit of the log-linear specification for Filipino men. The results are based on a number of estimation strategies, including spline regressions, and semi-parametric regressions with a large number of dummies for years of schooling and experience. The basic conclusions of the paper are two. First, there appear to be large differences between the rates of return to education across levels in the Philippines. In particular, the returns to both primary and secondary education are lower than those for tertiary education, a difference which persists even after correcting for differences in direct private costs across levels. Second, within a given level, the last year of schooling is disproportionately rewarded in terms of higher wages. That is, there are clear sheepskin effects associated with graduation from primary school, secondary school, and university.     

Innovation and entrepreneurship in the academic setting: a systematic literature review

In the knowledge society, universities have assumed new missions and relations in order to contribute to economic and social development, while preserving their own sustainability. This article aims to explore scientific literature on innovation and entrepreneurship in the academic setting, describing how the field is organized, main terms and definitions, theoretical frameworks, and empirical models, in order to direct future research. A systematic literature review was conducted, in which articles indexed at Web of Science were initially submitted to a bibliometric analysis. Then, the content of a set of articles best fitting the objectives of the study was analyzed. Bibliometric analysis shows an increasing literature, with publications over more than 40 years. There are studies from many disciplines, with those in business and economics prevailing, mainly related to management and originating from the USA and Europe. Content analysis shows a fragmented literature, with definitions not showing a clear relationship between innovation and entrepreneurship, or their use within universities in coherence with their traditional definitions. Both theoretical frameworks and empirical models are very heterogeneous, but four groups of studies were identified based on their theoretical frameworks, and also based on their empirical models. With only a few exceptions, empirical models do not share many components and variables, and there are no clear boundaries between the different models. Despite the increasing literature, it is still fragmented and undertheorized, requiring more systematic and holistic studies, considering both the economic and the social aspects of innovation and entrepreneurship within universities.     

Average and Marginal Returns to Upper Secondary Schooling in Indonesia

This paper estimates average and marginal returns to schooling in Indonesia using a semiparametric selection model. Identification of the model is given by geographic variation in access to upper secondary schools. We find that the return to upper secondary schooling varies widely across individuals: it can be as high as 50% per year of schooling for those very likely to enroll in upper secondary schooling, or as low as ?10% for those very unlikely to do so. Average returns for the student at the margin are substantial, but they are also well below those for the average student attending upper secondary schooling. Copyright © 2016 John Wiley & Sons, Ltd.     

A THEORETICAL AND PRACTICAL PERSPECTIVE ON THE EQUITY RISK PREMIUM*

Abstract In historical perspective, equity returns have been higher than interest rates but have also varied a good deal more. However, the average excess return has been larger than what could be expected based on classical equilibrium theory: the equity risk premium (ERP) puzzle. This paper has two objectives. First, the paper presents a comprehensive overview of the vast literature developed aimed at adjusting theory and testing the robustness of the puzzle. Here we will show that the failure of theory to link asset prices to economics is mostly quantitative by nature and not qualitative (anymore). Second, beyond providing a survey of theory, we aim for a relevant practical angle as well. Our main contribution is that we spend time on why returns have been higher than investors reasonably could have expected. We present evidence that forecasts of equity returns can be enhanced by valuation models: low valuation levels (low price‐to‐earnings ratios) portend high subsequent returns. While conventional wisdom (several years ago) was to use historical returns to forecast future returns, a growing consensus now recognizes that the predictive power of valuation ratios is preferred. Finally we provide some practical implications based on this predictability. While the ERP is essentially a long‐term issue, the likelihood of a lower risk premium increases risk for many and means that short‐term volatility might not be neglected.     

THE COLLAPSE OF PRIMARY SCHOOLING RETURNS IN SOUTH AFRICA 1960–90

By 1975, the effect of a year's primary schooling upon the wages of Africans in South Africa had fallen to about 2.5 percent — one of the lowest primary schooling returns in the world. Secondary schooling returns were high throughout the period 1960–90. The collapse of primary schooling returns was due to declining school quality, an increase in the supply of primary school graduates, an increase in mining wages in the mid-seventies, and wage regulation by the Industrial Councils and Wage Boards. The low level of the return, compared with the returns to other races in South Africa, is due to the low quality of African primary schools. Implications for education spending patterns and wage regulation are pointed out.     

Entrepreneurship education: the role of local business

Entrepreneurship education is high on political agendas for its contributions to cultural change and economic growth. Scholars have suggested that the local context may influence the results of entrepreneurship education, and have recommended that educators strengthen their relationships with local businesses and help students learn from actual business settings. By combining policy analysis with empirical data, the present qualitative study explores two issues. First, we look at how the role of local business is expressed in entrepreneurship education policy documents. Second, we explore how local entrepreneurial activity and culture may influence how policies are understood and translated into practice at the local level. The findings indicate that collaboration between schools and business life may strengthen, rather than change, existing local development paths. The present paper contributes to the literature and understanding of the interplay between entrepreneurship education policy and the local context and proposes several policy recommendations emerging from the empirical study.