School of Economics and Finance

No. 446: Returns to Schooling in Spain. How Reliable Are IV Estimates?

Empar Pons , Universidad de Valencia
Maria Teresa Gonzalo , Universidad de Valencia

November 1, 2001

Download full paper


This paper studies the Ordinary Least-Squared (OLS) and Instrumental Variables (IV) estimates of the returns to schooling for male workers in Spain. OLS estimates are often biased due to the endogeneity of schooling, measurement errors or omitted variables. Proper IV estimates correct this bias. The reliability of family background, natural experiments (based on changes in the education system and season of birth) and the availability of a college in the province is checked using Spanish data. The results suggest that background and college availability are valid instruments and that the IV estimates of the returns to schooling are higher than OLS estimates. These results are in line with the majority of previous results in the literature.

J.E.L classification codes: C13, C20, I21, J24

Keywords:Returns to schooling, Instrumental Variables, Spanish schooling system