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Heterogeneity in Schooling Rates of Return

Author

Listed:
  • Henderson, Daniel J.

    (University of Alabama)

  • Polachek, Solomon

    (Binghamton University, New York)

  • Wang, Le

    (Virginia Tech)

Abstract
This paper relaxes the assumption of homogeneous rates of return to schooling by employing nonparametric kernel regression. This approach allows us to examine the differences in rates of return to education both across and within groups. Similar to previous studies we find that on average blacks have higher returns to education than whites, natives have higher returns than immigrants and younger workers have higher returns than older workers. Contrary to previous studies we find that the average gap of the rate of return between white and black workers is larger than previously thought and the gap is smaller between immigrants and natives. We also uncover significant heterogeneity, the extent of which differs both across and within groups. The estimated densities of returns vary across groups and time periods and are often skewed. For example, during the period 1950-1990, at least 5% of whites have negative returns. Finally, we uncover the characteristics common amongst those with the smallest and largest returns to education. For example, we find that immigrants, aged 50-59, are most likely to have rates of return in the bottom 5% of the population.

Suggested Citation

  • Henderson, Daniel J. & Polachek, Solomon & Wang, Le, 2011. "Heterogeneity in Schooling Rates of Return," IZA Discussion Papers 5662, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5662
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    More about this item

    Keywords

    rate of return to education; Mincer regressions; nonparametric;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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