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Educational Expansion and Its Heterogeneous Returns for Wage Workers
Gebel, Michael | Pfeiffer, Friedhelm
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 130 (2010), Iss. 1 : pp. 19–42
21 Citations (CrossRef)
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Michael Gebel, University of Mannheim, Mannheim Centre of European Social Research, 68131 Mannheim, Germany.
Friedhelm Pfeiffer, Centre for European Economic Research, P.O. Box 103443, 68034 Mannheim, Germany.
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Abstract
This paper examines the evolution of returns to education in the West German labour market over the last two decades. During this period, graduates from the period of educational expansion entered the labour market and an upgrading of the skill structure took place. In order to tackle the issues of endogeneity of schooling and its heterogeneous returns, we apply two estimation methods: Wooldridge's (2004) approach that relies on conditional mean independence and Garen's (1984) control function approach that requires an exclusion restriction. For the population of wage workers from the SOEP, we find that both approaches produce estimates of average returns to education that decrease until the late 1990s and increase afterwards. The gender gap in returns to education seems to vanish. Furthermore, we find that the so-called „baby boomer" cohort has the lowest average return to education in early working life. However, this effect disappears when the „baby-boomer" cohort grows older.
Received: April 25, 2008
Accepted: April 8, 2009