Interpreting Instrumental Variables Estimates of the Returns to Schooling

Jeffrey R. Kling

NBER Working Paper No. 7989
Issued in October 2000
NBER Program(s):   LS   CH

This paper synthesizes economic insights from theoretical models of schooling choice based on individual benefits and econometric work interpreting instrumental variables estimates as weighted averages of individual-specific causal effects. Linkages are illustrated using college proximity to instrument for schooling. After characterizing groups differentially affected by the instrument according to family background, I directly compute weights underlying estimation of the overall return. In analyzing the level of schooling at which individuals change their behavior in response to the instrument, I demonstrate that this instrument has its greatest impact on the transition from high school to college. Specification robustness is also examined.

(167 K)

Published: Kling, Jeffrey R. "Interpreting Instrumental Variables Estimates Of The Returns To Schooling," Journal of Business and Economic Statistics, 2001, v19(3,Jul), 358-364.

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