Working Paper: NBER ID: w22291
Authors: James J. Heckman; John Eric Humphries; Gregory Veramendi
Abstract: This paper estimates returns to education using a dynamic model of educational choice that synthesizes approaches in the structural dynamic discrete choice literature with approaches used in the reduced form treatment effect literature. It is an empirically robust middle ground between the two approaches which estimates economically interpretable and policy-relevant dynamic treatment effects that account for heterogeneity in cognitive and non-cognitive skills and the continuation values of educational choices. Graduating college is not a wise choice for all. Ability bias is a major component of observed educational differentials. For some, there are substantial causal effects of education at all stages of schooling.
Keywords: Education; Earnings; Health; Smoking; Causal Effects
JEL Codes: C32; C38; I12; I14; I21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| selection bias (C24) | observed differences in wage outcomes (J31) |
| education (I29) | wages (J31) |
| education (I29) | health (I19) |
| education (I29) | smoking behaviors (I12) |
| high school graduation (I23) | wages (low-ability individuals) (J31) |
| post-secondary education (I23) | wages (high-ability individuals) (J31) |
| education (I29) | continuation values (J17) |