Why Do Diplomas Pay? An Expanded Mincerian Specification Applied to Mexico
Posted: 3 Sep 2009 Last revised: 31 Jul 2015
Date Written: April 1, 2008
Abstract
We compare four explanations for the value of diplomas, each of which has implications for unemployment and wage variation amongst graduates, most of which have not previously been tested for when seeking to explain the effects of diplomas. We test for these implications using a refined econometric framework, exploiting idiosyncrasies in Mexican labour market and educational institutions. Premiums in Mexico appear to result from diplomas tied to jobs with downwards rigid wages – an uncommon but simple explanation. The standard explanations, including screening, are not suggested by Mexican data. Our results illuminate how labour markets segmented by diplomas clear. This depends upon the nature of the labour market rigidities exactly as predicted by neoclassical theory.
Keywords: Diploma Effect, Sheepskin, Mexico, Return to Education
JEL Classification: J24
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