Chris Auld wrote:
> These are correlations and causation is anything but obvious, so the
> phrasing "each year of school raises wages by 10.3%" is misleading.
> There are very well-known endogeneity problems here, in addition to
> the observation that the human capital variables held constant are
> themselves affected by cognitive ability, such that the partial
> derivative estimated likely underestimates the total return to such
> ability dramatically.
I'll agree there are problems here, but I still think some simple
regressions bound the answer fairly well. Correlation among independent
variables is not a problem for estimating ceteris paribus effects,
though of course it is a problem for estimates total effects.
The main proviso I would impose is that OLS gives us average rates of
return, but presumably the people who benefit most from schooling are
most likely to get it. Thus the marginal rate of return has got to be
lower than 10.3%.
> The question above has been and continues to be the subject of much
> research; it is not a "fairly easy" problem at all.
We can keep researching questions to get more precise answers. But I
don't think this is a question where we remain unable to say much.
What really disturbs me is that most rate of return to education studies
still fail to control for IQ!
--
Prof. Bryan Caplan [EMAIL PROTECTED]
http://www.gmu.edu/departments/economics/bcaplan
"We may be dissatisfied with television for two quite different
reasons: because our set does not work, or because we dislike
the program we are receiving. Similarly, we may be dissatisfied
with ourselves for two quite different reasons: because our body
does not work (bodily illness), or because we dislike our
conduct (mental illness)."
--Thomas Szasz, *The Untamed Tongue*
