Private Returns to an University Education: An Instrumental Variables Approach |
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| Authors: | Manuel Salas-Velasco |
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| Institution: | (1) Teachers College, Columbia University, 525W. 120th Street, Box 181, New York, NY 10027, USA |
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| Abstract: | This article examines the determinants of the salaries that Spanish university graduates earn on the labor market. Different
earnings equations are estimated that allow us to measure the economic returns to investment in human capital at the university
level, demonstrating that: on the one hand, considering schooling to be an exogenous variable gives a downward bias to the
estimations of the private rates of return to an university education; on the other hand, not taking into account the aspects
of the demand-side of the labor market in the traditional Mincerian earnings function, even though schooling is considered
as an endogenous variable, the rates of return estimated for an university education would be given an upward bias. The problem
concerning the endogeneity of schooling has been corrected in this article by using the instrumental variables technique. |
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| Keywords: | demand for schooling earnings differential human capital rate of return |
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