Returns to Education and Individual Heterogeneity

19 Pages Posted: 13 Jun 2004 Last revised: 14 Aug 2008

See all articles by Michael F. Maier

Michael F. Maier

Center for European Economic Research (ZEW)

Friedhelm Pfeiffer

Centre for European Economic Research (ZEW); University of Mannheim - Department of Economics; IZA Institute of Labor Economics

Winfried Pohlmeier

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE)

Date Written: 2004

Abstract

In this paper, human capital investments are evaluated by assuming heterogeneous returns to education. We use the potential outcome approach to measure the causal effect of human capital investments on earnings as a continuous treatment effect. Empirical evidence is based on a sample of West German full-time employed males from the "BIBB/IAB-Strukturerhebung 1998/99." Our estimate of the average treatment effect of an additional year of schooling (ATE) amounts to 8.7%, which is quite similar to conventional instrumental variable estimates.

Keywords: potential outcome approach, marginal benefits and costs of schooling, unobserved heterogeneity, unemployment, average treatment effect

JEL Classification: I21, J60

Suggested Citation

Maier, Michael F. and Pfeiffer, Friedhelm and Pohlmeier, Winfried, Returns to Education and Individual Heterogeneity (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-034, Available at SSRN: https://ssrn.com/abstract=555951 or http://dx.doi.org/10.2139/ssrn.555951

Michael F. Maier

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Friedhelm Pfeiffer (Contact Author)

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
++49 (0)621/1235-150 (Phone)
++49 (0)621/1235-225 (Fax)

University of Mannheim - Department of Economics

D-68131 Mannheim
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Winfried Pohlmeier

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE) ( email )

Konstanz, D-78457
Germany

HOME PAGE: http://econometrics.wiwi.uni-konstanz.de

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