Title

Interpreting Sheepskin Effects in the Returns to Education

Author(s)

Alfonso Flores-Lagunes Alfonso Flores-Lagunes (University of Arizona)

Audrey Light Audrey Light (Ohio State University)

Abstract

Researchers often identify sheepskin effects by including degree attainment (D) and years of schooling (S) in a wage model, yet the source of independent variation in these measures is not well understood. We argue that S is negatively correlated with ability among degree-holders because the most able graduate the fastest, while a negative correlation exists among dropouts because the most able benefit from increased schooling. Using data from the NLSY79, we find that wages decrease with S among degree-holders and increase with S among dropouts. The independent variation in S and D needed for identification is not due to reporting error. Instead, we conclude that skill varies systematically among individuals with a given degree status.

Creation Date

Section URL ID

Paper Number

22

URL

https://dataspace.princeton.edu/bitstream/88435/dsp01qj72p717z/4/22ers.pdf

File Function

Jel

I26

Keyword(s)

Suppress

false

Series

2