TY  - JOUR
AU  - Heckman,James
AU  - Layne-Farrar,Anne
AU  - Todd,Petra
TI  - The Schooling Quality-Earnings Relationship: Using Economic Theory to Interpret Functional Forms Consistent with the Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5288
PY  - 1995
Y2  - October 1995
UR  - http://www.nber.org/papers/w5288
L1  - http://www.nber.org/papers/w5288.pdf
N1  - Author contact info:
James J. Heckman
Department of Economics
The University of Chicago
1126 E. 59th Street
Chicago, IL 60637
Tel: 773/702-0634
Fax: 773/702-8490
E-Mail: jjh@uchicago.edu

Petra E. Todd
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104
Tel: 215/898-4084
Fax: 215/573-2057
E-Mail: ptodd@econ.upenn.edu
AB  - This paper investigates the economic and empirical foundations of the evidence relating earnings to schooling quality.  We replicate the Card-Krueger model for Census years 1970, 1980 and 1990 and find that it consistently produces a strong relationship between schooling quality and the rate of return to schooling.  We test key identifying assumptions used by Card and Krueger and others.  Several assumptions are rejected.  When they are relaxed, the evidence for a strong effect of schooling quality on earning is greatly weakened.  A crucial identifying assumption is the absence of selective migration on the basis of earnings.  Nonparametric tests strongly reject this hypothesis.  The conventional assumption of linearity of the earnings- schooling relationship widely used in the literature is also rejected. The only surviving evidence of any schooling quality effect is in the return to college education.  We also test and reject conventional efficiency unit models of the pricing of labor services.  The empirically concordant model of earnings is a model of heterogeneous human capital in which regional shocks affect the prices of less- skilled labor.
ER  -