Econometric Studies in Human capital Theory Essay

Econometric Studies in Human capital Theory - Essay Example Furthermore the earnings of certain subgroups who had external structural influence on their schooling were higher than average individuals as a whole. It can be stated that Card focused more on the schooling differences leading to heterogeneous earnings yet revealed some interesting dimensions too (Card, 1830). Much of the literature that examines returns to schooling usually consider academic qualification while in Dearden et al., 2002 she applied econometric model using OLS estimation on returns to academic as well as vocational qualification in Britain. This study is a longitudinal study funded by the then DfEE whereas the sample data of National Child Development Study (NCDS), 1991 and Labour Force Survey (LFS) of 1998 has been used. Her study examines the varying aspects of gender, ability, qualification and family background too. This longitudinal study develops a framework where NCDS results were compare with LFC statistics while after some selection criteria a final sample s ize of 6867 individuals (3007 Male & 3860 Female) was processed through estimation. Estimation results identified that males with O-Levels/ GCSE earn 13 to 23% premium to their qualification while for A-levels they earn 18% and for a degree they yield 11 to 32% premium. In contrast to men, women with O-levels/ GCSE earn 11 to 21% premium and with A-levels it adds to 20% and for degree women return 30% premium to the qualifications in a year. The study confirmed that along with academic qualifications, if individuals acquire vocational qualifications their premium may rise by 40% but vocational qualifications alone have reported less premium (Deardan et... This paper offers review on econometric studies, undertaken with the purpose of determining the correlation between schooling quality and returns on investment on schooling. Over the last decade, many researches and extensive literature have evolved. Card in his study explored the causal relationship of education on earnings. The study explored an impact of an instrumental factor family background on the schooling and earning of their children which had 30% variation in the earnings, similarly college education differences and location near college had some significant influence over schooling and hence earnings. Dearden applied econometric model using OLS estimation on returns to academic as well as vocational qualification in Britain. Results identified that males with O-Levels/ GCSE earn 13 to 23% premium to their qualification while for A-levels they earn 18% and for a degree they yield 11 to 32% premium. In Mcintosh study the variance of qualification confirmed heterogeneous returns among O-levels, A-levels and degree level labour force. The vocational qualification as identified earlier at lower premium to academic qualification remained the same Harmon conducted microeconomic empirical investigation on the returns to schooling. He concluded that every investment reflects the size of returns. He used a comparative approach to analyze cross sectional returns on education and furthermore, he applied OLS estimation analysis. It can be stated that to examine the returns on schooling, an econometric study can best explain the causes of higher returns either that is family background or ability or academic qualification (college graduation, O-levels, university degree) or vocational qualification or training.