Estimating Marginal Returns to Higher Education in the UK
A long-standing issue in the literature on education is whether marginal returns to education fall as education rises. If the population differs in its rate of return, a closely related question is whether marginal returns to higher education fall as a greater fraction of the population enrolls. This paper proposes a nonparametric method of estimating marginal treatment effects in heterogeneous populations, and applies it to this question, examining returns to higher education in the UK. The results indicate that marginal returns to higher education fall as the proportion of the population with higher education rises, consistent with the Becker Woytinsky Lecture hypothesis.
The author would like to thank Marc Chan for research assistance and Lorraine Dearden for generous help in obtaining and using the data. Comments from Joshua Angrist, James Heckman, Guido Imbens, Matthew White, Tiemen Woutersen, and participants at workshops at several universities, research institutes, and conferences are appreciated, as well as comments from two anonymous referees, Thierry Magnac, and other participants at the "Conference on Econometric Evaluation of Public Policies: Methods and Applications," Paris, December, 2005 on an earlier closely related paper. The author also thanks Steffen Reinhold for correcting two errors in the Appendix. Research support from the National Institute of Child Health and Human Development is gratefully acknowledged. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.