Working Paper: CEPR ID: DP14310
Authors: Luigi Guiso; Luigi Pistaferri; Andreas Fagereng; Martin Holm
Abstract: Abstract We exploit a school reform that increased the length of compulsory schooling in Norway in the 1960s to study the causal effect of formal general education on returns on wealth (k-returns). OLS estimates reveal a strong, positive and statistically significant correlation between education and returns on individual net worth. This effect disappears in IV regressions, implying that general education has no causal effect on individual performance in capital markets, whose heterogeneity largely reflects non-acquired ability. On the contrary, we find that education causes higher returns in the labor market (l-returns). We speculate about possible rationales for this important asymmetry.
Keywords: returns to education; returns to capital
JEL Codes: G0; I0; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| education (I29) | kreturns (I26) |
| education (I29) | lreturns (R50) |
| unobserved abilities (D80) | kreturns (I26) |
| risk preferences or capital management ability (G11) | kreturns (I26) |
| education (I29) | capital market performance (G10) |
| education (I29) | kreturns (I26) |