Working Paper: CEPR ID: DP12738
Authors: Nadine Ketel; Edwin Leuven; Hessel Oosterbeek; Bas van der Klaauw
Abstract: We exploit admission lotteries to estimate the payoffs to the dentistry study in the Netherlands. Using data from up to 22 years after the lottery, we find that in most years after graduation dentists earn around 50,000 Euros more than they would earn in their next-best profession. The payoff is larger for men than for women but does not vary with high school GPA. The large payoffs cannot be attributed to longer working hours, larger human capital investments or sacrifices in family outcomes. The natural explanation is that Dutch dentists extract a monopoly rent, which we attribute to the limited supply of dentists in the Netherlands. We discuss policies to curtail this rent.
Keywords: returns to education; monopoly rents; random assignment; dentists
JEL Codes: J44; I18; I23; C36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Admission lottery outcome (D44) | Being admitted to study dentistry (I11) |
| Being admitted to study dentistry (I11) | Earnings premium (J31) |
| Limited supply of dentists (I11) | Earnings premium (J31) |
| Earnings premium (J31) | Monopoly rent (D42) |
| Monopoly rent (D42) | Earnings do not vary with high school GPA (D29) |
| Longer working hours (J29) | Earnings premium (J31) |
| Larger human capital investments (J24) | Earnings premium (J31) |
| Sacrifices in family outcomes (J12) | Earnings premium (J31) |
| Earnings premium for men (J31) | Earnings premium for women (J31) |
| Policy measures (e.g., increasing tuition fees) (E64) | Extraction of monopoly rents (D42) |