Compulsory Schooling and the Returns to Education: A Re-examination
SOAS Department of Economics Working Paper No. 199
30 Pages Posted: 12 Nov 2018
Date Written: November 12, 2018
Abstract
This paper re-examines the instrumental variable approach to estimating the effect of compulsory school law on education in the US pioneered by Angrist and Krueger (1991). We show that the approach not only yields empirically inconsistent estimates but is conceptually confused. The confusion arises from a rejection of the key causal variable as a valid conditional variable. By route of a causally explicit model design assisted by machine learning techniques, we identify the circumstances under which the wrongly rejected variable yields valid inference values. Our investigation demonstrates the importance of data-guided model selection over the choice of consistent estimators.
Keywords: instrumental variables, randomisation, research design, average return to education
JEL Classification: C26, C52, I21, I26, J24
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