Working Paper: CEPR ID: DP3199
Authors: Kevin Denny; Colm Harmon; Raemonn Lydon
Abstract: This Paper examines cross-country variations in the return to schooling for men and women and considers some of the stylised facts that have emerged from the extensive international literature on private returns to schooling. We examine the relationship across countries between these returns and a range of controls that can be grouped into three broad areas (i) supply factors, (ii) demand factors, and (iii) governmental policies and institutional factors. We find that the returns are decreasing in both labour force participation and, in some cases, in the average level of schooling in the population. In the multivariate analysis the only education variables that consistently matter are the proportions completing primary or third level education, which has negative and positive effects respectively. Standard measures of openness such as trade volume have positive effects, and we also find that measures of protection raise the return to schooling. Net inflows of foreign investment are associated with lower schooling returns - a result difficult to reconcile with the argument that capital is complementary to high skill labour and hence increases the skill premium.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| returns to education (I26) | labor force participation (J22) |
| average level of schooling in the population (I21) | returns to education (I26) |
| proportions of individuals completing primary education (I21) | returns to education (I26) |
| completion of tertiary education (I23) | returns to education (I26) |
| trade volume (F10) | returns to education (I26) |
| net inflows of foreign investment (F21) | returns to education (I26) |
| labor force participation rates (J49) | returns to education (I26) |