Tuesday, July 17, 2012

Returns to School Only Help if People Know About Them

JPAL has a nice write up a piece by Robert Jensen which looks at how perceived returns to education influence how much schooling a child receives. Jensen examines boys in the Dominican Republic and tests to see if providing accurate information on how much extra money a child will make by going to school influences the schooling decision.

The first question is how much extra does a child make by going to school. As Jensen notes there is no micro data on this available for the Dominican Republic so he does out and collects his own. He then finds the difference in wages between adults who attend secondary school and those that do not. Next he asks children about what they perceive to be the difference in wages between educated and non-educated workers. Their estimates are substantially lower than Jensen's estimates.

Here is the neat part he then created an experiment where half of the children are told the estimate returns and half receive no extra information. The idea is by telling children they will earn more if they go to school it will motivate them to attend more school. The experiment shows that children who receive the information go to about 1/5 to 1/3 of a year of school more over the next four years. Given how cheap the program is (just need to have seminars to tell kids about schooling) this is a good return.

Jensen does add some important caveats in his conclusion
"Of course, the desirability of such information-based programs will depend on the ability to provide accurate information on the returns to schooling, which may often be dif´Čücult. Further, even with accurate estimates, there may be reasons that the returns for the marginal child may not be as large as the currently measured average return"

The piece is published in the Quarterly Journal of Economics a top econ journal. It would be interesting to see this type of experiment replicated in other countries.

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