Estimating the returns to schooling

David Card:

Card is best known amongst intellectuals for his minimum wage work, but he also has been central in estimating the returns to higher education, using superior methods.  In particular, he has induced many economists to downgrade the import of the signaling model of education.  Here is one excerpt from his Econometrica paper, appropriately entitled “Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems:

A review of studies that have used compulsory schooling laws, differences in the accessibility of schools, and similar features as instrumental variables for completed education, reveals that the resulting estimates of the return to schooling are typically as
big or bigger than the corresponding ordinary least squares estimates. One interpretation of this finding is that marginal returns to education among the low-education subgroups typically affected by supply-side innovations tend to be relatively high, reflecting their high marginal costs of schooling, rather than low ability that limits their return to education.