Multidimensional skills and the returns to schooling: Evidence from an interactive fixed-effects approach and a linked survey-administrative data set |
| |
Authors: | Mohitosh Kejriwal Xiaoxiao Li Evan Totty |
| |
Institution: | 1. Krannert School of Management, Purdue University, West Lafayette, Indiana;2. Department of Economics, Villanova University, Villanova, Pennsylvania;3. Research & Methodology Directorate, US Census Bureau, Suitland, Maryland |
| |
Abstract: | This paper presents new evidence on returns to schooling based on an interactive fixed-effects framework that allows for multiple unobserved skills with potentially time-varying prices as well as individual-level heterogeneity in returns. This constitutes a substantive generalization of most existing approaches. Our empirical analysis employs a unique linked survey-administrative panel data set on education and earnings. We find average marginal returns to schooling of about 2.8–4.4% relative to least squares/instrumental variable estimates between 7.7% and 12.7%. Omitted ability accounts for a larger fraction of the aggregate least squares bias compared to heterogeneity. We also find considerable heterogeneity in individual returns. |
| |
Keywords: | |
|
|