AngristKruegerLec - Sarah Hamersma Revised Jan 2011...

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Sarah Hamersma Revised Jan 2011 Notes/Summary of “Does Compulsory School Attendance Affect Schooling and Earnings?” Angrist and Krueger, 1991 QJE The point: We have trouble understanding the effects of education on earnings because we are concerned that in the typical wage equation (with education as a regressor) there are omitted variables correlated with both education and wages. One way to get around this problem is to identify an instrument that predicts schooling but does not (independently) affect wages. Angrist and Krueger argue that they have found such an instrument: the quarter of one’s birth is correlated with completed schooling due to the institutional rules of school start ages and compulsory school attendance rules; however, there is no reason to think it will affect wages on its own, since it is “random” enough to be considered exogenous to most employment-related outcomes. What is the outcome of interest? Wages What is the parameter of interest? The coefficient on education in the structural equation What is the instrument? Quarter of birth (and various interactions with it) Note that this doesn’t exactly seem to line up with the title – I’m not sure why. They do a DD estimation procedure in the middle of the paper that lines up with the title, but it is not the focus of the paper. Structure of the Paper: I. Season of Birth, Compulsory Schooling, and Years of Education A. Direct Evidence on the Effect of Compulsory Schooling Laws B. Why Do Compulsory Schooling Laws Work? II. Estimating the Return to Education A. TSLS Estimates B. Allowing the Seasonal Pattern in Education to Vary by State of Birth C. Estimates for Black Men III. Other Possible Effects of Season of Birth IV. Conclusion I think this paper is organized very nicely. Let’s look at one section at a time.
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AngristKruegerLec - Sarah Hamersma Revised Jan 2011...

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