Author

• Abolghasem Naderi

Assistant Professor Faculty of Psychology & Education University of Tehran

Abstract

This articles aims at evaluating the effects of selectivity and endogeneity problems on returns to education caused by individuals' decision to attend school and to participate in the labour market. We apply conditional regression models (earnings functions) to tackle the problem of selection bias and use instrumental variable technique to take into account the problem of endogeneity. Using data from the Tehran province survey of socio-economic characteristics 1380 and the U.S. current population census 1991, we found that (1) return to education is positive and substantial, (2) taking into account the problems of selection and endogeneity increases the returns to education estimates, and (3) the findings of Tehran province sample are similar to those of the U.S. sample. Therefore, the pattern of findings are the same and also consistent with theoretical considerations stating that the conventional estimates which do not deal with the problems of selection and endogeneity produce biased and inconsistent results. 

Keywords

• Return to education
• selectivity problem
• selection bias
• endogeneity problem
• conditional regression
• instrumental variable