Using Unemployment Rates as Instruments to Estimate Returns to Schooling

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Arkes, Jeremy
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2010
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I use state unemployment rates during a person’s teenage years to estimate the returns to schooling. A higher unemployment rate reduces the opportunity costs of attending school. Using the same 1980 Census data set that Angrist and Krueger (1991) use, I also estimate returns to schooling with a modified version of their quarter-of-birth instrument. The estimates from the two-stage least squares (2SLS) model using the unemployment rate and the model using the quarter-of-birth instruments are almost identical. In addition, these 2SLS estimates are larger than the ordinary least squares (OLS) estimates, supporting this counterintuitive, yet prevalent, result in the literature.
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https://hdl.handle.net/10945/43824
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Graduate School of Business & Public Policy (GSBPP)
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Southern Economic Journal, 2010, Volume 76, Issue 3, pp. 711–722
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
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