TY  - JOUR
AU  - Hogan,Vincent
AU  - Rigobon,Roberto
TI  - Using Heteroscedasticity to Estimate the Returns to Education
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9145
PY  - 2002
Y2  - September 2002
UR  - http://www.nber.org/papers/w9145
L1  - http://www.nber.org/papers/w9145.pdf
N1  - Author contact info:
Vincent Hogan
E-Mail: hoganv@nber.org

Roberto Rigobon
MIT Sloan School of Management
100 Main Street, E62-516
Cambridge, MA 02142
Tel: 617/258-8374
Fax: 617/258-6855
E-Mail: rigobon@mit.edu
AB  - We apply a new estimator to the measurement of the economic returns to education. We control for endogenous education, unobserved ability and measurement error using only the natural heteroscedasticty of wages and education attainment. Our prefered estimate, 6.07%, is closer to the OLS estimate but smaller (and more precise) than the estimates typically reported by studies that use IV. Our results indicate that the biases generated by unobserved ability and measurement error tend to cancel each other out as suggested by Griliches (1977). We also present Monte Carlo evidence to show that the finite sample bias our estimator is small.
ER  -