Blundell, R; Dearden, L; Sianesi, B; (2003) Evaluating the impact of education on earnings in the UK:models, methods and results from the NCDS. (IFS Working Papers W03/20 ). The Institute for Fiscal Studies, UCL (University College London), The Institute for Fiscal Studies: London, UK.

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Abstract

Regression, matching, control function and instrumental variables methods forrecovering the impact of education on individual earnings are reviewed forsingle treatment and sequential multiple treatments with and without heterogeneousreturns. The sensitivity of the estimates once applied to a common datasetis then explored. We show the importance of correcting for detailed testscore and family background differences and of allowing for (observable) heterogeneityin returns. We find an average return of 27% for those completinghigher education versus anything less. Compared to stopping at 16 withoutqualifications, we find an average return to O-levels of 18%, to A-levels of24% and to higher education of 48%. Regression, matching, control function and instrumental variables methods forrecovering the impact of education on individual earnings are reviewed forsingle treatment and sequential multiple treatments with and without heterogeneousreturns. The sensitivity of the estimates once applied to a common datasetis then explored. We show the importance of correcting for detailed testscore and family background differences and of allowing for (observable) heterogeneityin returns. We find an average return of 27% for those completinghigher education versus anything less. Compared to stopping at 16 withoutqualifications, we find an average return to O-levels of 18%, to A-levels of24% and to higher education of 48%.

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