Many economists and policymakers believe that education creates positive externalities. Indeed, average schooling in U.S. states is highly correlated with state wage levels, even after controlling for the direct effect of schooling on individual wages. We use variation in child labor laws and compulsory attendance laws over time and across states to investigate whether this relationship is causal. Our results show external returns to education around 1% and not significantly different from zero.
The identification of aggregate human capital externalities is still not fully understood. The existing (Mincerian) approach may result in large positive externalities even when wages reflect marginal social products if workers with different levels of human capital are imperfect substitutes in production. We therefore propose an alternative (constant-composition) approach that identifies human capital externalities whether workers with different human capital are perfect or imperfect substitutes. Applying the constant-composition approach to US cities and states over the period 1970-1990 does not yield evidence of significant human capital externalities. Using the Mincerian approach instead yields that a one-year increase in average schooling has an external effect on productivity between 8 and 10 percent. We show theoretically and using simulations that the difference between the Mincerian and constant-composition estimates is consistent with empirically plausible values of the elasticity of substitution between more and less educated workers.
We examine the effect of maternal education on birth outcomes using Vital Statistics Natality data for 1970 to 1999. We also assess the importance of four channels through which maternal education may improve birth outcomes: use of prenatal care, smoking, marriage, and fertility. In an effort to account for the endogeneity of educational attainment, we use data about the availability of colleges in the woman's county in her seventeenth year as an instrument for maternal education. We find that higher maternal education improves infant health, as measured by birth weight and gestational age. It also increases the probability that a new mother is married, reduces parity, increases use of prenatal care, and reduces smoking, suggesting that these may be important pathways for the ultimate effect on health. Our results add to the growing body of literature which suggests that estimates of the returns to education which focus only on increases in wages understate the total return. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
The hypothesized effects of educational attainment on adult civic engagement and attitudes provide some of the most important justifications for government intervention in the market for education. In this study, I present evidence on whether these externalities exist. I assess and implement two strategies for identifying the effects of educational attainment. One is based on the availability of junior and community colleges; the other, on changes in teen exposure to child labor laws. The results suggest that educational attainment has large and statistically significant effects on subsequent voter participation and support for free speech. I also find that additional schooling appears to increase the quality of civic knowledge as measured by the frequency of newspaper readership.
We estimate the effect of education on participation in criminal activity using changes in state compulsory schooling laws over time to account for the endogeneity of schooling decisions. Using Census and FBI data, we find that schooling significantly reduces the probability of incarceration and arrest. NLSY data indicate that our results are caused by changes in criminal behavior and not differences in the probability of arrest or incarceration conditional on crime. We estimate that the social savings from crime reduction associated with high school graduation (for men) is about 14-26 percent of the private return.
Many economists and educators of diverse political beliefs favor public support for education on the premise that a more educated electorate enhances the quality of democracy. While some earlier studies document an association between schooling and citizenship, little attempt has been made to address the possibility that unobservable characteristics of citizens underlie this relationship. This paper explores the effect of extra schooling induced through compulsory schooling laws on the likelihood of becoming politically involved in the US and the UK. We find that educational attainment is related to several measures of political interest and involvement in both countries. For voter turnout, we find a strong and robust relationship between education and voting for the US, but not for the UK. Using the information on validated voting, we find that misreporting of voter status can not explain our estimates. Our results suggest that the observed drop in voter turnout in the US from 1964 to 2000 would have been 10.4 to 12.3 percentage points greater if high school attainment had stayed at 1964 rates, holding all else constant. However, when we condition on registration, our US results approach the UK findings. This may indicate that registration rules present a barrier to low-educated citizens' participation.
Economists have speculated for at least a century that the social return to education may exceed the private return. In this paper, I estimate spillovers from college education by comparing wages for otherwise similar individuals who work in cities with different shares of college graduates in the labor force. A key issue in this comparison is the presence of unobservable characteristics of individuals and cities that may raise wages and be correlated with college share. I use longitudinal data to estimate a model of non-random selection of workers among cities. I account for unobservable city-specific demand shocks by using two instrumental variables: the (lagged) city demographic structure and the presence of a land-grant college. I find that a percentage point increase in the supply of college graduates raises high school drop-outs’ wages by 1.9%, high school graduates’ wages by 1.6%, and college graduates wages by 0.4%. The effect is larger for less educated groups, as predicted by a conventional demand and supply model. But even for college graduates, an increase in the supply of college graduates increases wages, as predicted by a model that includes conventional demand and supply factors as well as spillovers.
I assess the magnitude of human capital spillovers by estimating production functions using a unique firm-worker matched data set. Productivity of plants in cities that experience large increases in the share of college graduates rises more than the productivity of similar plants in cities that experience small increases in the share of college graduates. These productivity gains are offset by increased labor costs. Using three alternative measures of economic distance--input-output flows, technological specialization, and patent citations--I find that within a city, spillovers between industries that are economically close are larger than spillovers between industries that are economically distant.
© 2004 European Expert Network on Economics of Education This e-mail address is protected against spambots. Please activate JavaScript in order to see them. | Home | Site Map | Contacts | Impressum | Printversion
