Return to Schooling Question Let\'s say that you are interested in estimating th

Question

Return to Schooling Question

Let's say that you are interested in estimating the returns to schooling in the Philippines. You know that in the north half of the country the government implemented a new law in 2000 that stated that all children ages 14 and younger were required to go to school, while those over the age of 14 were not. In the south, there was no such law. You have data on adult yearly earnings (surveyed in 2012) of children who were 13 at the time of the law change and children who were 15 at the time of the law change, from both the north and the south halves of the Philippines. Thus individuals in your data can be separated into the following four types: If you compare the current earnings of a Type A to a Type X. does the difference between their earnings reflect schooling effects, location effects, or both? Explain.

Explanation / Answer

a) Yes, difference in their earning is due to schooling as well as location. Because 13 years old children living in North Region, i.e. Type A go to the school therefore they are more likely to earn less. On the other hand Type X has more time to earn because they are not bound to go schools. So differences in their earnigs is affect of both schooling as well as location.

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