NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Years and Intensity of Schooling Investing

Arleen Leibowitz

NBER Working Paper No. 49
Issued in August 1974

An essential feature of schooling is not only that it occurs in a different site than most on-the-job training but also that it is more intensive. That is, a smaller proportion of gross potential earnings is sacrificed in on-the-job training than in schooling. In estimating human capital earnings functions it has generally been assumed that during schooling 100% of gross potential earnings are invested in all years, while in on-the-job training this percentage is smaller and is a declining function of age. This assumption has been quite useful since it allows the identification of an estimate of the rate of return on schooling from a regression of earnings on years of schooling. This paper argues that the percentage of gross earnings invested may fall below 100% well before schooling is ended, that this percentage is likely to be correlated with years of schooling, and thus this procedure yields only a biased estimate of the rate of return to schooling.

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Document Object Identifier (DOI): 10.3386/w0049

Published: American Economic Review, Vol. 66, no. 3 (1976): 321-334.

 
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