Understanding the Role of Time-Varying Unobserved Ability Heterogeneity in Education Production

48 Pages Posted: 3 Mar 2014 Last revised: 24 Jun 2023

See all articles by Weili Ding

Weili Ding

Queen's University

Steven F. Lehrer

Queen's University (Canada), Faculty of Arts & Science, Department of Economics, Students; National Bureau of Economic Research (NBER)

Date Written: February 2014

Abstract

Unobserved ability heterogeneity has long been postulated to play a key role in human capital development. Traditional strategies to estimate education production functions do not allow for varying role or development of unobserved ability as a child ages. Such restrictions are highly inconsistent with a growing body of scientific evidence; moreover, in order to obtain unbiased parameter estimates of observed educational inputs, researchers must properly account for unobserved skills that may be correlated with other inputs to the production process. To illustrate our empirical strategy we use experimental data from Tennessee's Student/Teacher Achievement Ratio experiment, known as Project STAR. We find that unobserved ability is endogenously developed over time and its impact on cognitive achievement varies significantly between grades in all subject areas. Moreover, we present evidence that accounting for time-varying unobserved ability across individuals and a more general depreciating pattern of observed inputs are both important when estimating education production functions.

Suggested Citation

Ding, Weili and Lehrer, Steven F., Understanding the Role of Time-Varying Unobserved Ability Heterogeneity in Education Production (February 2014). NBER Working Paper No. w19937, Available at SSRN: https://ssrn.com/abstract=2403661

Weili Ding (Contact Author)

Queen's University ( email )

Kingston, Ontario K7L 3N6
Canada
6135336000x78784 (Phone)
6135332135 (Fax)

HOME PAGE: http://post.queensu.ca/~dingw

Steven F. Lehrer

Queen's University (Canada), Faculty of Arts & Science, Department of Economics, Students ( email )

99 University Avenue
Kingston, Ontario
Canada

HOME PAGE: http://econ.queensu.ca/faculty/lehrer/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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