Does Measured School Quality Really Matter? An Examination of the Earnings-Quality Relationship

James Heckman, Anne Layne-Farrar, Petra Todd

NBER Working Paper No. 5274
Issued in September 1995
NBER Program(s):Labor Studies

This paper examines the economic and empirical foundations of the aggregate evidence on the effect of schooling quality on earnings. A common framework is presented which nests all previous studies as special cases. We discuss two crucial identifying assumptions and test them. The first assumption is the absence of region of birth - region of resident interactions in the return to schooling. This rules out patterns of migration on the basis of realized earnings in the destination state. Both parametric and nonparametric versions of this hypothesis are tested. Using 1970, 1980 and 1990 Census data, it is decisively rejected. A second assumption is that log earnings equations are linear - or nearly linear in schooling. This assumption is false. We find that estimated earnings-quality relationships are sensitive to specification of the earnings function. When false linearity assumptions are relaxed, the only effect of measured schooling quality is on the returns for college graduates. The evidence for an aggregate earnings-quality relationship is weak once false empirical restrictions are relaxed.

download in pdf format
   (1541 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5274

Published: Burtless, G. (ed.) Does Money Matter? The Effect of School Resources on Student Achievement and Success. Brookings, July 1996.

Users who downloaded this paper also downloaded* these:
Card and Krueger w3358 Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States
Card and Krueger w5450 Labor Market Effects of School Quality: Theory and Evidence
Heckman, Layne-Farrar, and Todd w5288 The Schooling Quality-Earnings Relationship: Using Economic Theory to Interpret Functional Forms Consistent with the Evidence
Wachtel The Effect of School Quality on Achievement, Attainment Levels, and Lifetime Earnings
Hanushek w10229 Some Simple Analytics of School Quality
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us