NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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.

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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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