1 / 16

How large are returns to schooling? Hint: money isn't everything

How large are returns to schooling? Hint: money isn't everything. Philip Oreopoulos and Kjell G. Salvanes. September 2009. ]. [. Returns to education. Economic returns (schooling as a financial investment ): Private : higher wages (7-12% more), more opportunity for consumption

lambertn
Download Presentation

How large are returns to schooling? Hint: money isn't everything

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. How large are returns to schooling? Hint: money isn't everything Philip Oreopoulos and Kjell G. Salvanes September 2009

  2. ] [ Returns to education Economic returns (schooling as a financial investment): • Private: higher wages (7-12% more), more opportunity for consumption • Public*: economic growth Non economic returns: • Public*: reduction of threats to security, participation in public life • Private: schooling affects lifetime well-being of individuals (self-reported happiness) * constitute strong incentives to the public funding of education.

  3. After conditioning for income the relationship does not disappear. Schooling affects individual well-being through many additional channels other than through income. Aim of the paper: to test the theoretical and empirical links between schooling and non-pecuniary outcomes

  4. ] [ Returns in the labour market Fringe benefits: pension contributions, paid vacations, stock options. More rewarding jobs: • sense of accomplishment, autonomy and social interactions (O*NET data) • occupational prestige • job satisfaction • job security (in addition to workers earnings, lead to depression and low self esteem).

  5. ] [ Returns outside the labour market Critical thinking and social skills (strongly and positively correlated with schooling/causation not clear). Two models: • Productive efficiency model:skills act as technology shocks (multitasking). • Allocative efficiency models: individuals with better skills make better decisions. Examples: • Good health: due to healthy habits and healthy activities. Faster response to new medical information for those with more schooling (allocative efficiency hp.). • Better (and more stable) marriages: schooled people more appealing in competitive marriage markets, critical thinking and social skills crucial in managing the marriage (lower divorce rates)

  6. ] [ Returns outside the labour market II • Higher children development and social-economic success throughout life (persists also after conditioning on income, therefore not due only to resources): parenting style differs by school attainment: determinant for children's cognitive development

  7. ] [ Effects on preferences Schooling may change people's preferences (provides information on new opportunities for consumption or develops patience). Enhances students' attention to the future: change in time preferences. Strongly related to the reduction of risky behaviours, such as teen fertility and crime activity.

  8. ] ] [ Effects on preferences II Schooling fosters trust, which improves social interaction and community involvement. • Causal relationship: relative reasons (ones' social status becomes higher than the other's), additive reasons (teaches people how to interact successfully), super additive reasons (everyone becomes more trusting).

  9. ] [ Negative non-pecuniary returns • Added stress: stress hormones are negatively associated with schooling and income (higher pressure offset by better health and social support or access to commodities which help saving time) • Constraints on time

  10. ] [ Schooling as consumption Schooling normally considered in economic theory as an opportunity cost (wage a student does not earn while schooling) or as a psychic cost (effort a student has to make in order to get education). But student's life can also be seen as a consumption good. • Evidence: students' enrollment decisions (increase in colleges with better sport equipments and better social life, controlled for the academic ranking)

  11. ] [ Measurement issues • Heterogeneity: difficult to assess impacts for sub-groups (problem partly resolved by dividing results by groups). • Schooling versus education: years of schooling are not particularly good measures of education (limited information on what it is about schooling that produces pecuniary and non pecuniary returns). Over-reliance on quantitative- and qualification-based measures (data readily available), but poor information on the quality of education. • Signalling skills through schooling: difficult to distinguish, but seems not so evident in non-pecuniary benefits (especially in the case of diverse individual attitudes).

  12. ] [ Measurement issues II • Causality: difficult to estimate causal effects (schooling may be spuriously correlated to particular outcomes). Problem often resolved in two ways: 1. using syblings and twins with different levels of schooling: ability and family background are kept constant. 2. using data related to policy changes which affect schooling attainment (for example minimum schooling legislation).

  13. ] [ Measurement issues III

  14. Measurement issues

  15. ] [ Conclusions Why so much difference in schooling attainment if going to school is so convenient? • Financial obstacles • Students are shortsighted

More Related