Compulsory Education and the Benefits of Schooling
Causal estimates of the benefits of increased schooling using U.S. state schooling laws as instruments typically rely on specifications which assume common trends across states in the factors affecting different birth cohorts. Differential changes across states during this period, such as relative school quality improvements, suggest that this assumption may fail to hold. Across a number of outcomes including wages, unemployment, and divorce, we find that statistically significant causal estimates become insignificant and, in many instances, wrong-signed when allowing year of birth effects to vary across regions.
We would like to thank John Bound, Kerwin Charles, Steve Haider, and seminar participants at Columbia University, Ohio State University, the University of Kentucky, and UM-MSU-UWO Labor Day for helpful comments and suggestions. An earlier version of this paper circulated with the title "Schooling Laws, School Quality, and the Returns to Schooling." The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Melvin Stephens Jr. & Dou-Yan Yang, 2014. "Compulsory Education and the Benefits of Schooling," American Economic Review, American Economic Association, vol. 104(6), pages 1777-92, June. citation courtesy of