Flores-Lagunes study on interpreting degree effects published in Journal of Human Resources
Mar 31, 2010
Interpreting Degree Effects in the Returns to Education
Alfonso Flores-Lagunes & Audrey Light
Journal of Human Resources, March 2010
Researchers often identify degree effects by including degree attainment (D) and years of schooling (S) in a wage model, yet the source of independent variation in these measures is not well understood. The authors argue that S is negatively correlated with ability among degree-holders because the most able graduate the fastest, while a positive correlation exists among dropouts because the most able benefit from increased schooling. Using data from the NLSY79, the authors find support for this explanation, and we reject the notion that the independent variation in S and D reflects reporting error.