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11 Cards in this Set
- Front
- Back
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What are the two types of models of schooling choice?
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Signaling model and Schooling model
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What does the Signaling model focus on?
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Two types of ability(High and low)
Education costs more for low ability Education does not impact productivity Everyone has the same discount rate People sort themselves through degree obtainment |
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What does the Schooling model suggest?
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Education does increase productivity and wages
Workers maximizes lifetime PV of earnings Variation in education comes from variation in individual discount rates The higher r, the lower the likely education choice Assumes individuals know wage earning locus |
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Basic Regression Models
lnw=Bo+B1S+B2+u |
Bo=intercept=lnwage if schooling is 0
B1=returns to each year of education by percent b2=influence of other factors |
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What are Dummy variables?
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All Dummy variables are equal to 1 or 0. Such as black or male.
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Statistically significant
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If T-stat is >2 it is statistically significant.
T stat is equal to |
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Problems with regression
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Omitted variables--> Bias
Self selection Bias--> People sort themselves |
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Jager and page(1996)
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Testing signaling model by checking for additional returns to a degree.
Including dummies for degreee on top of years of education Find substantial returns to a degree which supports signaling model to some degree |
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Angrist and Krueger(1991)
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Tests effects of compulsory schooling laws
Use of quarter of birth as an instrument for education. Variation in education driven by variation in quarter of birth where quarter of birth is unrelated to ability Results similar to OLS--> little ability bias |
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Card and Krueger(1992)
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Test relationship between school quality and return to education
Find that lower p/b ration and better paid teachers are associated to higher returns to education. |
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Ashenfelter & Krueger 1994
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Try to account for unobservable bias and measurement error by studying twins.
-Family effects go away when conparing twins -All variable comes from dif in education more gindings are that ommitted variable bias doesnt seem to do much -measurement error biases results downward -estimate true returns to education at 10-14% |
