Media type: E-Article Title: Chapter 30. The Causal Effect of Education on Earnings Contributor: Card, David [VerfasserIn] imprint: 1999 Published in: Handbook of labor economics ; (1999), Seite 1801-1863 Language: English DOI: 10.1016/S1573-4463(99)03011-4 ISBN: 9780444501875; 0444501878 Identifier: Origination: Footnote: Description: This paper surveys the recent literature on the causal relationship between education and earnings. I focus on four areas of work: theoretical and econometric advances in modelling the causal effect of education in the presence of heterogeneous returns to schooling; recent studies that use institutional aspects of the education system to form instrumental variables estimates of the return to schooling; recent studies of the earnings and schooling of twins; and recent attempts to explicitly model sources of heterogeneity in the returns to education. Consistent with earlier surveys of the literature, I conclude that the average (or average marginal) return to education is not much below the estimate that emerges from a standard human capital earnings function fit by OLS. Evidence from the latest studies of identical twins suggests a small upward “ability” bias – on the order of 10%. A consistent finding among studies using instrumental variables based on institutional changes in the education system is that the estimated returns to schooling are 20–40% above the corresponding OLS estimates. Part of the explanation for this finding may be that marginal returns to schooling for certain subgroups – particularly relatively disadvantaged groups with low education outcomes – are higher than the average marginal returns to education in the population as a whole. © 1999 Elsevier Science B.V. All rights reserved.