Evaluating the effect of education on earnings: models, methods and results from the National Child Development Survey

Richard Blundell
Lorraine Dearden
Barbara Sianesi

Published on 1 July 2005

This Journal article has been replaced by Evaluating the impact of education on earnings in the UK: Models, methods and results from the NCDS

This paper uses a variety of methods to examine the impact of educational attainment of future earnings. Compared with stopping education at 16 years of age with no qualifications, we find that acquiring O-levels (GCSEs) increases earnings by 18%, A-levels increases earnings by 24% and going to higher education increases earnings by 48%.

Regression, matching, control function and instrumental variables methods for recovering the effect of education on individual earnings are reviewed for single treatments and sequential multiple treatments with and without heterogeneous returns. The sensitivity of the estimates once applied to a common data set is then explored. We show the importance of correcting for detailed test score and family background differences and of allowing for (observable) heterogeneity in returns. We find an average return of 27% for those completing higher education versus anything less. Compared with stopping at 16 years of age without qualifications, we find an average return to O-levels of 18%, to A-levels of 24% and to higher education of 48%.

Find the working paper here.